Suddenly investors can’t get enough of GSK shares! What’s going on? keeps showing up in conversations for a reason. The story below covers what is actually happening, where the trade-offs sit, and what a careful reader should take from it.
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It’s been a long wait, but GSK (LSE: GSK) shares are finally in demand. And when I say long, I mean long. Yesterday (17 April) the shares traded at 2,125p. Incredibly, that’s their highest since November 2000, when the FTSE 100 pharmaceutical giant had just been renamed GlaxoSmithKline and peaked at 2,048p.
Back then, GlaxoSmithKline was seen as one of the most solid and reliable dividend stocks on the blue-chip index. A yield of 5%-6% seemed assured, with steady share price growth too. The shares were then plunged as the dot-com boom unwound and by 2004, they’d roughly halved. Progress since then has been patchy.
Until recently, the stock was bumping along near a 10-year low. Suddenly, that’s changed.
FTSE 100 big seller
GSK’s now the most popular stock among UK investors over the last week, accounting for 5.46% of all purchases on the AJ Bell platform. That’s more than double second-placed Legal & General, with just 2.63%. It’s also streaking ahead of big sellers like Microsoft, Rolls-Royce, BAE Systems, Nvidia and BP. So what’s driving the surge?
It’s not down to fresh news. GSK hasn’t reported since 4 February, when it posted a strong set of results. Full-year sales rose 7% to £32.7bn, while underlying operating profit climbed 11% to £9.8bn, slightly ahead of expectations.
New chief executive Luke Miels maintained the growth targets set by predecessor Emma Walmsley, with sales forecast to reach £40bn by 2031.
For years, GSK struggled as it worked to replenish its drugs pipeline after a string of blockbuster treatments came off patent. To fund that investment, Walmsley froze the dividend at 80p per share for eight long years to 2022. That dreary stretch culminated in a cut to 57.75p, instead of the hoped-for hike.
We’ve seen a couple of respectable dividend increases, lifting the full-year 2025 payout to 60.6p. Further growth seems possible, with free cash flow jumping 41% to £4bn.
Dividends and growth
Income seekers may be underwhelmed by the current yield of around 3.1%, but that’s partly because the share price has done so well. GSK is up an impressive 56% over the last year. I’m personally thrilled with that, having bought in two years ago.
GSK looks built for volatile times like today. I can see why it’s in demand. The valuation remains reasonable, with a price-to-earnings ratio of 12.3 (it looked like a screaming bargain with a P/E of eight when I bought it).
It’s also produced a string of clinical successes, which have further bolstered investor demand. But as with every stock, there are still risks. Like all pharmaceutical companies, GSK faces constant pressure to develop new treatments and vaccines. But the process is lengthy, and late stage failures are always a risk.
The sector’s also under pressure from governments to cut drug prices. US tariff concerns also linger, as do the risk of class action lawsuits.
Even so, GSK’s delivered. For investors with a long-term outlook, it still looks well worth considering. Yet after such a strong run, anyone buying today should be ready for a period of slower progress from here.
