A
few years ago I bought a few shares of GlaxoSmithKline (GSK)
because of it's
good dividend yield and
dividend-paying track record.
I felt myself really good while I was receiving the dividends. But a
few month ago, I read the company’s 2016 Annual Report. I saw that
the EPS was £0,19
and the dividend was £0,80,
so the EPS didn’t cover the dividend. It was not a good news for
me, so I read more to see the chairman’s words about it. I found
this:
“Ordinary
dividends of 80p per share have been declared for 2016, the same
level as 2015. The company expects to maintain the same payment in
2017, in accordance with the statements made in 2015. This
level of distribution still exceeds the free cash flow generated by
the business despite the material improvement in cash generated in
2016 referred to above. Given that 2017 is the last year of the
three year dividend commitment made in 2015, the Board will be
considering the appropriate dividend policy for 2018 and beyond
during the course of the year.
”
(Source:
Annual Report 2016 – GSK, 04.p.)
I
think that the Board will cut the dividend in
2018. The GSK needs a really
good financial performance in 2017 to avoid the dividend cut. The
first quater of 2017 was a good beginning, but
I sold my shares, because I'm
more relaxed to watch it from a little distance.
Full
disclosure: I have no
position in GlaxoSmithKline.
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