Gilead Sciences' (NASDAQ:GILD) Dividend Will Be Increased To $0.77

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.

Check out our latest analysis for Gilead Sciences

Gilead Sciences' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Gilead Sciences was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 31.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

Gilead Sciences Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 9 years was $1.72 in 2015, and the most recent fiscal year payment was $3.08. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Gilead Sciences to be a consistent dividend paying stock.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, Gilead Sciences' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.6% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Gilead Sciences' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Gilead Sciences that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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