Dead-Weight Dividend Stocks: GlaxoSmithKline (GSK)
Why It’s Dead Weight: Lackluster pipeline
With a current yield of 4.7%, GlaxoSmithKline plc (ADR) (NYSE:GSK) has superficially has earned a spot on the market’s short list of top dividend stocks. Look beyond the snapshot, however, and you might not like what you find.
There’s a reason GSK shares have barely broken even over the course of the past year, are down 9% for the past couple of years, and are in the red to the tune of 26% since this point in the year 2014. That is, GlaxoSmithKline has one of the least compelling drug R&D pipelines in the business.
To its credit, it is getting better. Its efforts to target the OX40 protein on cancer cells holds promise, and it’s got two HIV drugs in phase-3 trials that are showing great results. Its shingles vaccine appears to work quite well too.
A closer look at each of those drugs, their prospects and their competition, however, takes a great deal of the shine off. The shingles vaccine Shingrix, for instance, will have to compete with an established drug from Merck, while its flagship HIV development is a drug taken in tandem with a Johnson & Johnson treatment, cutting into its total revenue potential.
GlaxoSmithKline doesn’t have any breakout drugs in the works, and even fewer of the items in its pipeline are in a position to bolster revenue in the early part of this year.