Why this FTSE 100 pharma stock is one for investors to consider right now

There are plenty of strong dividend stocks in the FTSE 100 Index right now. The Footsie average dividend yield is sitting at 3.5% as I write on 19 May with some big-name shares offering compelling payouts to shareholders.

GSK (LSE: GSK) is one such company that has caught my eye. The multinational pharmaceutical giant has a forward dividend yield of 4.6% and regularly pays out a high percentage of its earnings to shareholders.

With that in mind, here are a couple of reasons why I think GSK is a dividend stock for investors to consider in 2025.

Recent performance

It hasnât been all plain-sailing for the GSK share price in recent times. Despite climbing 2.6% in 2025 to Â£13.97 as I write, the companyâs shares are still down 21.3% in the last 12 months.

There are a few factors at play here. A $2.2bn (Â£1.7bn) settlement over its heartburn medication drug, Zantac, in October last year weighed on the share price alongside falling vaccine sales.

However, 2025 got off to a strong start with growth in revenue and profits, largely driven by 17% growth in its specialty medicines segment sales in the first quarter. On a constant exchange rate (CER) basis, Q1 sales increased by 4% to Â£7.5bn while core operating profits climbed 5% to Â£2.5bn.

This positive start, combined with a history as a strong dividend payer and shareholder-friendly board, makes it a FTSE 100 stock worth a closer look by dividend investors, I feel.

Valuation

That said, GSK’s current price-to-earnings (P/E) ratio is 18.3 which is well above the Footsie average

Pharmaceuticals as a sector does tend to come with higher ratios than the market average. Thatâs because so much upfront investment is made in the potential cash cow drugs of tomorrow, so a lot of growth is baked into the current share prices of these companies.

With that in mind, GSK looks a touch undervalued to me. For example, fellow pharmaceuticals giant AstraZeneca has a P/E ratio of 27.4 as I write. This relative pricing against key peers is just another reason I think the stock is worth considering.

Looking at dividends, the company expects to pay a full-year distribution of 64p per share. That’s within its target payout ratio of 40% to 60% and represents a dividend yield of 4.6%.

My Verdict

I think GSK is worth further research. The positive earnings outlook and strong history as a dividend payer could provide a valuable foundation for future income.

From a personal standpoint, Iâm happy with my current portfolio mix so I wonât be buying right now. There are risks to this thesis of course, with a P/E ratio well above the Footsie average in a sector with regulatory risk and significant upfront costs.

With a significant market cap of Â£57.3bn and a sector that tends to hold up well throughout the economic cycle, I like the long-term prospects of GSK. Those factors make the company one that I think income investors should be taking a closer look at in 2025.

The post Why this FTSE 100 pharma stock is one for investors to consider right now appeared first on The Motley Fool UK.

Should you invest £1,000 in Gsk right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Gsk made the list?

See the 6 stocks

More reading

The Motley Fool UK has recommended AstraZeneca Plc and GSK. 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.