Gilead Sciences (NASDAQ:GILD) Has Announced That It Will Be Increasing Its Dividend To $0.75

The board of Gilead Sciences, Inc. (NASDAQ:GILD) has announced that it will be paying its dividend of $0.75 on the 29th of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Gilead Sciences

Gilead Sciences' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Gilead Sciences' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 30.4% over the next year. 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 Doesn't Have A Long Payment History

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 $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Gilead Sciences has been growing its earnings per share at 11% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Gilead Sciences Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Gilead Sciences that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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