Here’s the GSK dividend forecast for 2023 and 2024

FTSE 100 pharmaceutical giants GSK (LSE: GSK) is a popular stock for dividend income, but last year saw cut payments and major changes to the business.

Here, I’ll discuss the latest dividend forecast for GSK, and explain why I currently view this stock as a buy.

In 2022, GSK split its consumer health division into a new business called Haleon. The split means that GSK is now a pure pharmaceutical business, with a focus on areas including cancer, vaccines and respiratory diseases.

I think these smaller, more focused businesses could be well positioned to generate sustained long-term growth. The new results certainly look encouraging to me. Sales from its continuing business rose 13% to £29bn last year, while profits rose 23% to £4.9bn.

Forecast

City analysts covering GSK now have time to update and publish new brokerage forecasts for 2023 and 2024.

GSK also provides direct guidance on the dividend it expects to pay in 2023. The company doesn’t always do this, but it helps when it does.

Forecast	Dividends per share	Dividend yield
2023	56.5 p	4.0%
2024	59.9 p	4.3%

The numbers tell us that the stock offers a forecast dividend yield of 4% today. The dividend is expected to grow by around 6% next year, giving shareholders a meaningful rate of earnings growth.

GSK’s profits are also expected to rise by 6-10% per year in the next couple of years, while the debt level is expected to fall. Which makes me think that the current payments should be sustainable.

Strong growth prospects?

New medicines generally get patent protection for 20 years. This makes it almost impossible for competing companies to develop competing products, supporting higher prices.

However, when a drug’s patent protection ends, competing companies often start producing generic alternatives. This is the same drug but sold for less. For example, paracetamol is a generic of Panadol.

When generics enter the market, the price of branded products is usually cut to remain competitive. This can lead to decreased profits for the original owner of the drug.

As a result, large pharmaceutical companies need a reliable supply of new products to ensure profits do not decline in the long term.

In recent years, GSK’s new product pipeline has been weaker than some of its rivals. I’m starting to see signs of improvement, but it’s too soon to be sure.

Now, I would say that this is a major risk for me as a potential investor. I don’t have the medical knowledge necessary to judge whether a new product will work – and if it does, whether it will be a big seller.

GSK: buy today?

I expect the demand for modern medicine to continue to grow in my lifetime. GSK is one of the largest companies in this sector, with a long history of innovation.

Although I am not sure about the future growth prospects for this business, I think the current share price reflects this risk. In my view, GSK looks reasonably valued, even in a low growth scenario.

If the performance is better than expected, I Share may be worth more in the future. If that’s the case, I will be comfortable buying GSK today, if I have a free slot in my portfolio.