GlaxoSmithKline Is Wasting Money Paying a Dividend

As a general rule, I love companies that pay big dividends -- and British pharmaceutical giant GlaxoSmithKline (NYSE: GSK) pays some of the best dividends on the planet. That said, there's one very good reason why GlaxoSmithKline should not be paying a dividend, and that reason is debt.

Currently, GlaxoSmithKline pays its shareholders an annual dividend of $1.04 per share (there are two British "common shares" in each of the American Depositary Receipts bought on the NYSE). Thus, Glaxo's $1.04-per-share dividend works out to a 5.2% dividend yield on every one of the $39-and-change stock's U.S. ADRs.

GlaxoSmithKline's dividend is so large partly because its stock price is so small. Glaxo's profits, you see, are currently depressed by large, and ongoing, restructuring charges, and with profits in the tank, investors have dumped GlaxoSmithKline stock, which is down 9% over the past year in a market that has seen the S&P 500 rise 12%.

Source: Fool.com