Investors who want to cash in on Gilead Sciences, Inc.’s (NASDAQ:GILD) upcoming dividend of US$0.63 per share have only 3 days left to buy the shares before its ex-dividend date, 14 March 2019, in time for dividends payable on the 28 March 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Gilead Sciences’s latest financial data to analyse its dividend characteristics.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does Gilead Sciences fare?
Gilead Sciences has a trailing twelve-month payout ratio of 54%, which means that the dividend is covered by earnings. However, going forward, analysts expect GILD’s payout to fall to 40% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 4.3%. However, EPS should increase to $5.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Gilead Sciences as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Gilead Sciences generates a yield of 4.0%, which is high for Biotechs stocks.
With these dividend metrics in mind, I definitely rank Gilead Sciences as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for GILD’s future growth? Take a look at our free research report of analyst consensus for GILD’s outlook.
- Valuation: What is GILD worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GILD is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.