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Trending: GlaxoSmithKline Dividend at Risk as Revenues Take Hit

Iuri Struta Feb 18, 2021

Dividend.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.

GlaxoSmithKline has taken the first spot in the list this week, as the pharmaceutical giant – focused on vaccines – is having a bad year and might be forced to cut its dividend. Second on the list is food and beverages giant Pepsico, which recently increased its dividend on strong revenue growth. DHT Holdings is third, as the crude oil tanker slashed its dividend again. Last is telecommunications group Vodafone, as the company indicated revenue growth is finally looking to resume.

Don’t forget to read our previous edition of trends here.

GlaxoSmithKline

U.K.-based pharma giant GlaxoSmithKline (GSK) has secured the first spot in the list this week with a 45% increase in viewership.

GlaxoSmithKline has experienced a pretty weak year in terms of revenue growth as the company’s key vaccine Shingrix has seen lower sales volumes as patients and doctors prioritized COVID-19 care. Although GlaxoSmithKline is focused on vaccines and antibiotics, the company has failed to develop a COVID-19 jab itself and take advantage of the huge global demand. A collaboration with France’s Sanofi has so far failed to produce results, and the company now expects the vaccine to be ready by the end of the year, compared to mid-2021 previously thought.

GlaxoSmithKline also revealed a disappointing earnings report and guidance for 2021. The company expects profits to fall between mid and high single digits, triggering a wave of analyst downgrades and worries that the dividend might be at risk.

GlaxoSmithKline pays a forward annualized dividend of $2.51 per share, representing a yield of over 7%. With a payout ratio of nearly 90%, the company runs into the risk of reducing its dividend if earnings drop significantly.

Shares in GlaxoSmithKline are down by nearly 8% since the start of the year and by 23% over the past 12 months.

GSK Barchart Interactive Chart 02 16 2021

Source: Barchart.com

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Pepsico

Pepsico (“PEP”: https://www.dividend.com/stocks/consumer-staples/consumer-products/beverages/pep-pepsico/) has taken the second spot this week, with an advance in viewership of 36%. The snacks and beverage company has increased its dividend again, as it reported very strong results for the fourth quarter and full year.

Pepsico said it will pay $4.30 per share starting in June 2021, up from $4.09 per share. This is the 49th consecutive annual dividend increase. For the fourth quarter, Pepsico’s revenues grew by 8.8%, while organic revenue rose by 5.7%. For the full year 2020, organic revenues surged by 4.3%. The operating results were largely driven by strong sales of beverages and resilience in the snacks category.

For 2021, the company forecast a mid-single-digit increase in organic revenues, and a high single-digit increase in earnings per share. It also expects to return up to $5.9 billion to shareholders via dividends and share repurchases.

Pepsico shares remain down around 7% over the past 12 months.

PEP Barchart Interactive Chart 02 16 2021

Source: Barchart.com

Check out our latest Best Dividend Stocks List here.

DHT Holdings

Crude oil shipping company DHT Holdings (DHT) has taken the third position in the list with a rise in viewership of 33%. DHT dramatically cut its dividend in the fourth quarter as the COVID-19 pandemic continued to affect its business.

DHT reported a fourth-quarter dividend of $0.05 per share, down from $0.20 in the third quarter and $0.48 in the bumper second quarter. The company’s revenues fell abruptly from $142 million to $91 million.

However, 2020 was DHT’s best year ever in terms of revenues and shareholder returns. For the full year, DHT reported revenues of $691 million versus $535 million in 2019. The company benefited from turmoil in oil markets in the second quarter of 2020, when demand for containers skyrocketed, pushing prices up accordingly.

Shares in DHT are down nearly 30% from a peak reached in May 2020.

DHT Barchart Interactive Chart 02 16 2021

Source: Barchart.com

Vodafone Group

U.K. telecommunications company Vodafone Group (VOD) is last in the list, with an increase in viewership of 18%.

Vodafone, which has a dividend yield of 5.75%, has reported service revenue growth of 0.4% in the third fiscal quarter, versus a fall of 0.4% in the second quarter.

The company’s revenues have been suffering slightly from lower roaming as people traveled less due to the coronavirus pandemic. However, lower roaming revenues were offset by demand for data in the consumer sector and connectivity solutions in the business segment.

Vodafone reported revenues of 11.2 billion euros in the fiscal third quarter of 2021, down from 11.75 billion euros in the same period last year. Organic growth, however, was up by 0.4% in service revenues.

Shares in Vodafone are down more than 10% over the past 12 months.

VOD.LN Barchart Interactive Chart 02 16 2021

Source: Barchart.com

The Bottom Line

GlaxoSmithKline is facing the risk of cutting its dividend as earnings per share are expected to decline in 2021. PepsiCo reported solid results for the last quarter and the year, and raised its dividend as a result. DHT Holdings cut its dividend as shipping revenues and profits fell abruptly amid the coronavirus pandemic. Vodafone’s latest results instilled investor optimism.

Be sure to check out Dividend.com’s News section for next week’s Market Wrap and other great dividend investing news.