I’ve been a GlaxoSmithKline (LSE: GSK) shareholder for three decades. But with the GSK share price going nowhere fast, I’m thinking about selling my entire shareholding. Why keep faith in a company which has been a serial disappointment since 1999?
The GSK share price has struggled this century
Thanks to family connections with Glaxo and Wellcome, I’ve keenly followed GSK since the 1980s. I bought my first Glaxo (as it was then) shares in 1988/9. Also, I know upwards of 50 veteran GSK insiders and ex-employees. I’ve had a long, deep and intimate relationship with this firm. But looking at the GSK share price, I ask myself why remain a loyal shareholder when it keeps costing me money?
In the 1980s and 1990s, being a Glaxo shareholder was highly lucrative. The business boomed under the leadership of biochemist Sir Richard Sykes. During the late-millennium bull market, the GSK share price hit a record intra-day high of 2,333p and closing high of 2,288p on 8 January 1999. Sadly, it’s all been downhill since then. For the record, here’s the performance of the shares over various periods:
As you can see, the GSK share price has made zero progress in recent years. Alas, despite being a major vaccine supplier, GSK failed to capitalise on the global Covid-19 pandemic. Meanwhile, other big pharma stocks have soared in value. As I write, the GSK share price stands at 1,327.6p. That’s almost £1 below the 1,425p it closed at on Christmas Eve, 1997. In other words, it’s been a lost quarter-century for long-term GSK shareholders — including me.
GSK’s saving grace is its juicy dividend
Earlier this year, the GSK share price fell below £12, hitting a low of 1,190.8p on 26 February. That’s a very long way from their 52-week high of 1,748.55p on 13 May 2020. A fortnight ago, I made a positive decision not to sell my stake in GlaxoSmithKline. For a long time, I’ve kept hold of my stake because of GSK’s generous dividend yield. At the current share price, the steady 80p-a-year dividend works out to a hefty dividend yield of 6% a year. But is it worth taking these cash pay-outs and/or reinvesting them into shares that have declined for over half of my lifetime? Also, GSK has said it will cut this dividend next year. Hence, I’m seriously having second thoughts about holding on.
GSK’s latest results were pants
GlaxoSmithKline released its latest quarterly results yesterday. Initially, the GSK share price leapt to a high of nearly 1,370p, before falling back to close at 1,336.6p (down 0.2p). It was the same old story at GSK of declining revenues (down 18% to £7.4bn) and falling earnings per share (down a whopping 32% to 21.5p). Yikes.
Today, my main worry with GSK is concern about the company’s upper management. Every GSK ‘lifer’ I speak with is disillusioned with the strategy, vision, and competence of GSK’s directors and senior managers. For me, it sounds like GSK desperately needs the kick up the rear that activist investor Elliott Associates could provide! In the meantime, I will hold onto my GSK stock for now.
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Cliffdarcy owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.