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Digging in to the Glaxosmithkline dividend payment (LON:GSK)

Jack Brumby

Glaxosmithkline (LON:GSK) is a global healthcare company that pays out an attractive rolling dividend yield of 4.75%.

I'd like to know how safe Glaxosmithkline's dividend is. Dividend cover (earnings per share divided by dividend per share) of two times or above is strong. Anything below one and a half times suggests we need to look a little closer.


Computing Glaxosmithkline's dividend cover ratio

Poor dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It could also mean that the company is forgoing profitable investment opportunities that could generate future earnings growth. With that in mind, let’s take a look at Glaxosmithkline dividend cover.

We can get all the information we need to see if Glaxosmithkline has an adequate level of dividend cover from the group’s StockReport. The group’s trailing twelve month (TTM) EPS is 91.4p and its TTM dividend per share is 80p

Divide the former by the latter and we get a trailing twelve-month dividend cover for Glaxosmithkline of 1.14. This is below the 1.5 times cover limit that marks the point at which we should do some further digging on dividend sustainability and safety.

Income investing: what you need to know

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As for Glaxosmithkline (LON:GSK), you can find a wealth of financial data on the group's StockReport, including information on the group's past and forecast dividend payments. If you’d like to discover more about dividend investing, you can read our free ebook: How to Make Money in Dividend Stocks.