ANOTHER GREAT STOCK FIND!

While reviewing AstraZeneca's stats, I also decided to take a look at Glaxo Smith Kline (GSK:NYSE). GSK pays a $2.29 annual dividend per share, which represents a yield of 6.00% on their recent share price of $38.26. Their price to earnings is 10.90 with earnings of $3.49 per share. They also have $3.65 per share in cash, so their dividend should be quite sustainable. Their ROE is 60.40% with a gross margin of 81.70% and a profit margin of 19.50%.

With my purchase of a stake in AstraZeneca, I found myself short on cash to buy a stake in GSK. So I decided to take profits I'd made on Merck to purchase a position in GSK. I think GSK's numbers are better right now and I am retaining the same dollar position I originally held in Merck shares, so it's kind of like playing with the house's money. But I think that I'll actually come out much better with my position in GSK than if I left the entire amount invested with Merck. I'll also be adding an additional source of dividend income.

Glaxo Smith Kline is facing criticism and possible litigation over diabetes drug Avandia, due to implication of increased heart attack risks for persons taking the drug. However, loss of sales of Avandia in the U.S. would cut 2010 and 2011 earnings estimates by less than 1%. While litigation still could have detrimental effects on earnings going forward, I think that overall the company will come out O.K.. It's not unlike a similar situation faced by Merck a few years back. The threat of litigation and the resulting depressed stock price, could spell opportunity for anyone wanting to invest in GSK for the long term.