Is a Dividend Cut Coming From GlaxoSmithKline plc?
One of the attractions of investing in British drugmaker GlaxoSmithKline plc (NYSE: GSK) is its generous dividend yield, which lately has hovered at just a bit less than 6%. A yield that's so far out of whack with peers in the industry is an indication that the market is discounting trouble ahead. How likely is a dividend cut, and is the recent drop in the stock price a warning or a buying opportunity?
GlaxoSmithKline's shares have slumped since early summer, and the biggest concern has been the safety of the dividend. At a July 26 investor event, Glaxo CEO Emma Walmsley and her team stirred up new worries about the dividend when they announced a change in policy coming after 2018. The company is committed to maintaining the current dividend through 2018, but after that, Glaxo will return to its pre-2015 practice of declaring the payout on a quarter-by-quarter basis rather than committing to it in advance.
Image source: GlaxoSmithKline plc.
Source: Fool.com
