In an ideal world, a company would expand its dividend as it grows its profits and its market share. The payout offered to investors in this instance serves as both a reward for their ongoing support and a promise of future growth. In reality, the factors that determine a stock’s dividend yield are rarely this well aligned.
Sometimes a management team will choose to prioritise the dividend in spite of an uncertain outlook – as pharmaceutical major GSK (GSK) has done. There are a handful of forthcoming catalysts that could have a profound impact on the group’s share price and, by extension, its payouts to shareholders. The first among these is an ongoing legal saga in the US, where tens of thousands of people have filed lawsuits alleging that the heartburn treatment Zantac gave them cancer.