GlaxoSmithKline (NYSE:GSK) disappointed a lot of investors when it trimmed its dividend by 17% in April to $0.465 a share , but the pharmaceutical giant is still an income stock.

Even at its current level, it produces a yield of 4.5%, nearly twice the average for healthcare companies and well above the 2% average yield of the S&P 500. What interested investors should be asking is whether the current dividend is sustainable, and for that, you need to look at the company's financial health and its payout ratio.

GlaxoSmithKline gets high marks for both. In the first quarter, the company's sales were $11.7 billion, up 19% year over year, with improved sales in each division, led by consumer healthcare. Net profits for the quarter were $2.1 billion, up 28.9% year over year.

Bottles of pills on a shelf.

Image source: Getty Images.

That's not an aberration, as the pharmaceutical company has five consecutive years of revenue growth and four consecutive years of net income growth.

The company's payout ratio of 58.7% over the trailing 12 months (TTM) is higher than most investors would like, but it's not high enough to raise red flags. Generally, anything below 60% is considered safe.

Lots of potential in the pipeline

GlaxoSmithKline, based in London, has nearly 100,000 employees and has ample diversification with two divisions -- pharmaceuticals/vaccines and consumer healthcare. The former division easily brings in the most money.

There are plenty of growth possibilities in pharmaceuticals, particularly in oncology after the company spent $5.1 billion to buy Tesaro last year. GlaxoSmithKline has a huge pipeline, with 37 medicines in development, including six new drugs possibly getting approved this year.

The company's newest blockbuster, cabotegravir, has already been approved in Canada and is awaiting word from the U.S. Food and Drug Administration (FDA). Viic Healthcare, a joint venture of GlaxoSmithKline and Pfizer (NYSE:PFE), developed the drug.

The trial for cabotegravir, a bimonthly injection to prevent HIV infection, was stopped in May nearly three years early because of its success. Tests show that it was more effective than Gilead Sciences' (NASDAQ:GILD) daily tablet Truvada, which is the current leader in HIV prevention. 

The market for HIV prevention -- known as pre-exposure prophylaxis, or PrEP -- is currently $2 billion, and it's expected to rise to $5.5 billion by 2030.

Here are some other developments that could benefit GlaxoSmithKline's bottom line this year:

  • In May, the FDA approved Zejula, one of the drugs brought over by Tesaro, as a first-line maintenance treatment for women with ovarian cancer.
  • Belantamab mafodotin, another Tesaro drug, was given FDA priority review in January for patients with relapsed or refractory multiple myeloma, the second most common form of blood cancer.
  • In late April, the FDA accepted submission of dostarlimab, another Tesaro addition, as a second-line treatment for endometrial (uterine) cancer.
  • The company has multiple collaborations to develop COVID-19 vaccines.
  • The company is also awaiting approval for a combo of cabotegravir and rilpivirine, to treat HIV; fostemsavir, also for HIV; and, in Japan, daprodustat for renal anemia due to chronic kidney disease. The company is also awaiting word on the use of COPD drug Trelegy Ellipta for asthma.

Compared with its nearest competitors, the company's share price has held up well over the past year. As of market close Wednesday, the stock was up 1.8% over the past 12 months and 22% in the past three. 

Past year's performance for GSK and top competitors.

Image source: YCharts.

As a great dividend stock, GlaxoSmithKline has two things going for it: consistent growth and a high but sustainable yield. The 6.6% yield it boasted in 2015 may not be back for a while, but the current yield gives the dividend room to grow.

The recent dividend cut was the first for the company in more than 20 years, and it's unlikely to happen again anytime soon.