GlaxoSmithKline: why I like this 'big and boring' share

It’s been four months since I started Stock of the Week.

To mark this momentous occasion I’m going to have another look at GlaxoSmithKline, the drugs giant with which I began the series.

The reason for revisiting Glaxo is the company’s annual results this week which have renewed debate over the pros and cons of it as a stock for investors.

I’m taking a particularly close interest in this debate because I’m about to start investing £10,000 Citywire has given me to run a portfolio of Citywire Top Stocks®.

I’m thinking I might make Glaxo my first investment as it remains the most popular Top Stock, held by four of the five fund managers on our panel.

Four out of five top stock pickers can’t be wrong, can they?

Well, I’ve discovered that my choice of first stock doesn’t impress some Citywire Money readers, who found it mind-numbingly tedious.

That’s fair enough, I have to admit Glaxo has got a reputation for being big and boring.

Buying Glaxo is not exactly pushing the boat out in terms of stock market ingenuity, I accept.

But do you know what? In these troubled times I’m not into taking unnecessary risks.

I like big and boring, particularly when big means a strong balance sheet that can withstand the economic storms and boring means it pays handsome dividends and buys back lots of its shares to improve shareholder returns.

The company revealed this week it had distributed every penny of the £5.6 billion free cash flow it generated last year, either in dividends or via share buybacks.

That’s an impressive achievement and shows that chief executive Andrew Witty is keen to look after his shareholders and put the legal problems of the past and the huge provisions it made in 2010 behind him.

But what about the future?

Critics acknowledge that the share price did well last year as the company was rerated. But a small but disappointing fall in sales last year and a caution from the company that profit margins would rise only slightly this year gave critics an opportunity to ask where will growth come from in future?

The big hope here is Glaxo’s pipeline of new drugs. The lack of new products under patent protection has been the fatal weakness of big pharmaceutical companies in recent years. However, Glaxo appears to be doing better than its arch rival AstraZeneca.

Investors will have to wait until next month to find out more but we know that Glaxo has 30 new treatments moving into the final stage of clinical development in the next three years.

If some of these come off it could prolong the rally in Glaxo’s shares, which seems to have come off the boil of late. As a nervous Top Stock investor my only worry about buying Glaxo is that I am coming late to the party. We shall just have to see how I do in another four months.