Gilead Sciences' (NASDAQ:GILD) Shareholders Will Receive A Bigger Dividend Than Last Year
Gilead Sciences, Inc.'s (NASDAQ:GILD) dividend will be increasing from last year's payment of the same period to $0.77 on 28th of March. This will take the dividend yield to an attractive 4.1%, providing a nice boost to shareholder returns.
See our latest analysis for Gilead Sciences
Gilead Sciences' Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Gilead Sciences' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 31.5%. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.
Gilead Sciences Is Still Building Its Track Record
It is great to see that Gilead Sciences has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2015, the dividend has gone from $1.72 total annually to $3.08. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. Gilead Sciences has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.
Gilead Sciences May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Gilead Sciences' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Gilead Sciences is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Gilead Sciences' Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Gilead Sciences that investors need to be conscious of moving forward. Is Gilead Sciences not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
