Gilead Sciences' (NASDAQ:GILD) Upcoming Dividend Will Be Larger Than Last Year's

Gilead Sciences, Inc. (NASDAQ:GILD) will increase its dividend from last year's comparable payment on the 29th of June to $0.75. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Gilead Sciences

Gilead Sciences' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. 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.

Over the next year, EPS is forecast to expand by 32.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2015, the annual payment back then was $1.72, compared to the most recent full-year payment of $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Gilead Sciences has grown earnings per share at 11% per 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

Overall, a dividend increase is always good, and we think that Gilead Sciences is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 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.

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