GSK share price: Star fund manager argues pharmco should cut dividend

on Feb 25, 2016
Updated: Oct 21, 2019

GlaxoSmithKline (LON:GSK) should cut its dividend, Neil Woodford has said. Woodford, a top fund manager and shareholder in the blue-chip drug giant, who had previously called for a break-up of the company, argues that the pharmco’s management is pursuing the wrong strategy.

GSK’s share price has surged in today’s session, having added 2.98 percent to 1,401.00p, largely in line with gains in the broader London market. The pharmco’s stock has gained two percent in the year-to-date.
The Financial Times quoted Neil Woodford as arguing that GSK, in which he holds a significant stake, should trim its payout to shareholders. His comments come after the FTSE 100 pharma group updated investors on its full-year performance earlier this month, announcing an ordinary dividend of 80p, as well as special dividend of 20p. The company expects to maintain the 80p full-year dividend this year and next.

“My view is that the company is over-distributing,” Woodford said this week. “In my view Glaxo will only succeed in the future if it retains more flexibility as a result of having more cash flow in the business.”
The fund manager had previously urged the break-up of GSK, arguing that the business should be divided into separate companies, rather than run as a single £65-billion giant. The company’s management, however, has so far opposed Woodford’s calls.
“My view is that the board and the executive are pursuing the wrong strategy and I think the last 20 years of history have proven I’m right and Andrew [Witty, Glaxo’s chief executive] is wrong,” he pointed out, as quoted by the FT. “Glaxo cannot execute their diversifying strategy successfully — they haven’t and they won’t.”
Woodford, however, added that he would only consider selling shares in the pharma giant if he felt that GSK was ‘overvalued’, noting that he did not think that was the case at present.
As of 15:33 GMT, Thursday, 25 February, GlaxoSmithKline plc share price is 1,401.75p.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.