I would choose GSK for regular income
News about Covid-19 vaccines has boosted investor attention to pharmaceutical stocks. Some have done well, but one of the major pharmaceutical stocks that has performed poorly this year is the UK giant GlaxoSmithKline (LSE: GSK). Even after strengthening over the past two weeks, stocks are still trading almost 20% less over the year.
This gives the opportunity to pick up the stocks on the cheap. GSK is a well-established pharmaceutical company. It has increased its sales and profits every year for the past four years.
The risk of declining earnings due to reduced demand for antibiotics has hit stocks this year. I’m not worried about this, because in the long run I believe the company will be able to rely on revenue from its large pharmaceutical franchises such as Juluca and Trelegy. Its mainstream branding business also includes strong brands such as Panadol and Sensadyne.
The company pays shareholders an annual dividend of 80 pence, making the return a solid 5.5%. The dividend has been static for years, but it is covered by earnings. I don’t expect a cut.
GSK has been a strong dividend payer, continuing to make quarterly payments throughout the pandemic. In an ISA on stocks and stocks, I find a regular dividend payer like GSK appealing, because each payment can build up value over time.
S4 Capital is my choice of equity growth and ISA shares
In addition to income, I would look for a stock that I plan to increase in value in the years to come.
Advertising legend Sir Martin Sorrell has spent decades building WPP through acquisitions. After leaving WPP in 2018, he launched a new digital advertising company using the same approach, called Capital S4 (LSE: SFOR). I like the growth by acquisition model – it allows an ad agency to grow to run global accounts. It is also faster than organic growth. With a proven dealmaker at the helm, S4 Capital has grown rapidly. As digital media grows, S4 has many opportunities to increase its scale. That’s why I like S4 Capital as the growth choice for an Equity ISA.
S4 Capital’s approach has enrolled major accounts such as Google and BMW. The company recently stated its intention to double its gross sales and margin organically over three years. Acquisitions add to this.
The stock market likes the story of S4 Capital, with stocks more than double what they were in January. The company is expected to continue to grow rapidly – third quarter revenue increased 53% from a year ago. With growth like this, I like the title as a growth choice.
Christopher Ruane owns shares in S4 Capital. The Motley Fool UK recommended GlaxoSmithKline. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations that we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a diverse range of information makes us better investors.