Up 33% in a year! This fast‑recovering FTSE dividend share might not be a bargain forever

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I love it when a plan comes together, and that’s now happening with a FTSE 100 dividend share I bought in March 2024. The stock in question is pharmaceutical giant GSK (LSE: GSK), which looked good value when I bought it, with a price‑to‑earnings (P/E) ratio of around 8. That was beaten down by years of underwhelming performance.

The GSK share price continued to slide after I bought it. The first reason was the US class action over its heartburn drug Zantac. No sooner was that settled with a $2.2bn payoff than US tariffs on pharmaceuticals threatened. I soon found myself down around 15%, which wasn’t part of the plan, being honest, but I stayed calm and things are now looking up.

GSK shares up 12 % in the last month, lifting the 12‑month gain to about 33%. I’m only up around 10% personally but these are early days, because this was a stock I plan to hold years, and ideally decades.

Long-term FTSE 100 play

I last covered GSK for The Motley Fool on 28 October when I noted the share price recovery was under way but the shares still looked good value with a P/E of 10.6. The P/E ratio had edged up to 11.45, but that’s still comfortably below the FTSE 100 average of around 18.

On 29 October GSK published its Q3 results and they were strong. Core operating profit rose 11% to £2.99bn while core earnings per share jumped 14% to 55p.

The board declared a third‑quarter dividend of 16p a share and confirmed £2bn of share buybacks by mid‑2026, with £1.1bn already done. The full‑year guidance was raised too.

GSK’s pipeline finally appears to be delivering, speciality medicines are driving growth and free cash flow is strong. The recovery feels credible.

Broker forecasts so-so

Yet there are risks. The tariff threats hasn’t fully lifted and while the pipeline is looking better, potential blockbuster drugs are never guaranteed. A weak trial, regulatory setback or litigation surprise could knock confidence.

Broker forecasts produce a 12-month consensus price target around 1,773p. Sadly, that’s actually below today’s price around 1,806p. If those predictions are correct, the next year won’t be as good as the last. Analyst ratings are mixed too: only nine of 23 rate GSK stock a Buy while four say Sell.

Yet I believe this is still a bargain, for investors who have a long‑term view. Nobody can say where any share price will go in the short term, but over the years, I’d expect GSK to deliver a steady combination of growth and income. The trailing yield is a modest 3.35%, but should grow steadily. The shares are forecast to hit 3.57% in 2025, and 3.83% in 2026.

GSK looks worth considering for investors looking to create a balanced portfolio, including exposure to the pharmaceutical sector, traditionally seen as a defensive corner of the market. Today looks like a good entry point, given the low P/E, but investors should only buy with the long term in mind. That should always be a key part of the plan when buying FTSE 100 shares.

The post Up 33% in a year! This fast‑recovering FTSE dividend share might not be a bargain forever appeared first on The Motley Fool UK.

More reading

• Why does GSK’s share price look cheap to me anywhere under £47.78?
• 2 of my favourite FTSE 100 stocks are looking great in November
• The UK stock market hits new highs – but should investors tread carefully?
• This forgotten FTSE 100 dividend hero is up 20% in 3 months but still dirt cheap with a P/E of 10!
• While there are bubbles in the stock market, this sector looks dirt cheap

Harvey Jones has positions in GSK. The Motley Fool UK has recommended 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.

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