What to Know About GlaxoSmithKline plc (ADR) (GSK)

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In Glaxo’s case, the company carried 18.3 billion pounds of debt at the end of 2012 — up from 14.9 billion pounds in 2011 and 15.1 billion pounds in 2010.

And when you factor in Glaxo’s 4.2 billion pounds in cash it holds on the balance sheet, you see that Glaxo is carrying net debt of 14.1 billion pounds.

While investing in a company that carries billions in debt may seem scary, remember that the company is also making billions each year.

And in Glaxo’s case, the company generated very healthy operating profits of 7.4 billion pounds in 2012, and that number reflects a comfortable debt-to-operating-profit ratio of about 1.9:1.

Is GlaxoSmithKline plc (ADR) (LSE:GSK) (NYSE:GSK) going to PAY you dividends?

After looking at the money a company makes alongside what it owes, there’s one final number to pay attention to in the case of income-generating shares such as Glaxo.

Dividend growth.

A dividend is cash paid to you as a shareholder of the company. You want to look for companies with a good track record of dividend growth and a good strong balance sheet to cover that dividend.

Glaxo has raised its total dividend payout nicely over the past three years, from 63 pence per share in 2010 to 67 pence in 2011, all the way up to 74 pence per share in 2012.

Better still, the trend continues: management hiked the quarterly dividend another 6% to 18 pence per share in the first quarter of 2013.

With a current yield of about 4.2%, GlaxoSmithKline plc (ADR) (LSE:GSK) (NYSE:GSK) offers shareholders a generous income stream. As long as the company can grow earnings at a modest single-digit growth rate, dividend growth should follow, if GlaxoSmithKline plc (ADR) (LSE:GSK) (NYSE:GSK)’s long history of dividend increases is any guide.

And the verdict is in on GlaxoSmithKline!

Of course, anyone investing in Glaxo today knows that it’s all about what the company can do from here.

Share-price performance has been solid, but not spectacular. Glaxo is up 24% in the past year, against 27% for the FTSE 100. Over the past three years, Glaxo is up about 52% against 33% for the index

That growth is pretty impressive, but most people invest in Glaxo — as I have — as a foundational, dividend-paying share for your portfolio.

And great news for interested investors — my fellow Motley Fool analysts seem to agree with me!

The article 3 Things You Need to Know About GlaxoSmithKline originally appeared on Fool.com and is written by Jill Ralph.

Jill Ralph owns shares of GlaxoSmithKline. The Motley Fool recommends GlaxoSmithKline.

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