Last update on 2024-06-27

Gilead Sciences (GILD) - Dividend Analysis (Final Score: 5/8)

Detailed analysis of Gilead Sciences (GILD) dividend policy using an 8-criteria scoring system, resulting in a score of 5/8. Learn about dividend yield, growth and sustainability.

Short Analysis - Dividend Score: 5

We're running Gilead Sciences (GILD) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

This analysis is about Gilead Sciences' dividend policy. They score a 5 out of 8 on a criteria system to assess dividend performance and stability. Let's dive into the specific areas: **Good Points:** - **Dividend Yield:** 3.7032%, higher than the industry average; showing strong returns. - **Cash Flow Coverage:** Improved from 15.3% (2014) to 51.3% (2023); indicates solid financial management. - **Stable Dividends:** Paid dividends since 2015, increasing consistently every year up to $3 in 2023 without any big drops. **Concerns:** - **Growth Rate & History:** Started dividends only in 2015, so no 20-year growth rate history. There has been some instability recently in growth rates. - **Payout Ratio:** The payout ratio has been high (151.63% average) due to gaps in years and extraordinary situations like the peak in 2020. - **Earnings Coverage:** Dividends aren't fully covered by earnings (0.6609 ratio in 2023). **Historical Perspective:** Since they've only been paying dividends for 8 years, they do not meet the 25-year criterion. This means less long-term consistency compared to companies with a longer history.

Insights for Value Investors Seeking Stable Income

Considering both the positives and the concerns, Gilead Sciences (GILD) shows strength in dividend yield, cash flow coverage, and stable payouts since 2015. However, the high payout ratio and less than full earnings coverage present risks. If you value consistent cash flow and progressive dividend growth since 2015, this could be a good investment. But, if you are cautious about long-term stability and want a company with extensive dividend history, you might want to look for more seasoned companies. Basically, it's a mixed bag—good for those willing to take some risks for potentially higher returns, but maybe not for conservative, long-term investors.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that tells investors how much a company pays out in dividends each year relative to its stock price. A higher dividend yield indicates a potentially higher return on investment.

Gilead Sciences (GILD) has a current dividend yield of 3.7032%, which is notably higher than the industry average of 3.29%. Historically, Gilead started paying dividends in 2015 with a yield of 1.2748%. Since then, their yield has generally increased, peaking at 4.6687% in 2020. In comparison, the overall industry average has seen a significant historical decline from 162.86% in 2020 to an average of 3.29% in 2023. This trend suggests that Gilead Sciences has been more consistent and reliable in its dividend payouts compared to the broader industry, making it an attractive option for dividend-seeking investors. The higher yield coupled with a relatively stable dividend growth over the years signifies strength and confidence in Gilead's financial health. This trend is good as it implies a better return for investors relative to the industry.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate measures the annualized percentage rate of growth of a company's dividend payments over a specified period, and it is critical for investors because it provides insight into the long-term sustainability and profitability of a company's dividend policy.

Gilead Sciences began paying dividends only in 2015, so we cannot analyze a 20-year history. Since 2015, the dividend per share has fluctuated, with initial years showing higher ratios (e.g., 42.6357 in 2015) and a gradual decline to 2.7397 in 2023. An average growth rate is calculated, but the inconsistency signifies instability, rendering it less attractive for dividend growth investors seeking stable and growing payouts. Thus, this trend is concerning for long-term dividend sustainability.

Average annual Payout Ratio lower than 65% in the last 20 years?

Examining the payout ratio over two decades helps to assess sustainability of dividends. A payout ratio under 65% is generally considered healthy.

From 2003 to 2014, Gilead Sciences had a payout ratio of 0%, as they did not pay dividends. Starting from 2015, the payout ratio varied, significantly increasing in 2020 to 2778.35%, which skews the average to a high 151.63%. Excluding 2020, the average payout ratio would be considerably lower. The high ratio in 2020 might be due to extraordinary circumstances. Overall, the average above 65% raises concerns about long-term sustainability, despite some years showing a healthy ratio.

Dividends Well Covered by Earnings?

A well-covered dividend signifies that a company can comfortably pay its dividends from its earnings, indicating financial health and stability.

From 2003 to 2012, Gilead Sciences (GILD) did not pay any dividends. Starting in 2015, the company began paying dividends. We see gradual increases from $1.29 in 2015 to $3 in 2023. The Earnings per Share (EPS) has been volatile, notably peaking at $11.9053 in 2015 and taking a dip in 2020 at $0.0979. The dividend coverage ratio, which marks how well the dividends are covered by earnings, shows a concerning trend in 2020 with a sharp peak. Generally, a ratio above 1 indicates a healthy dividend coverage; Gilead's most recent value in 2023 is 0.6609, implying that earnings are insufficient to fully cover dividends. This trend might raise alarms for potential investors concerning the sustainability of Gilead's dividends if EPS does not stabilize at higher levels.

Dividends Well Covered by Cash Flow?

The criterion assesses if the company's dividend payments are well-supported by its free cash flow. It ensures that dividends are sustainable without straining the company's finances.

For Gilead Sciences (GILD), the trend of dividends covered by free cash flow from 2014 to 2023 indicates a consistently improving ability to cover dividend payouts. Starting at 15.3% coverage in 2014 and reaching 51.3% in 2023, Gilead has shown a growing free cash flow relative to its dividend payouts. This improvement is especially notable when considering the highest dividend coverage ratio was 51.3% in 2023.The healthy coverage ratio above 35% each year from 2017 onward indicates a favorable trend, suggesting that the dividends are well-covered and sustainable. Investors can feel confident in the dividend's stability, reflecting strong cash generation and prudent financial management.The trend is good as it demonstrates that Gilead's dividends are increasingly well-supported by cash flow, reaffirming to investors a solid dividend outlook

Stable Dividends Since the Company Began Paying Dividends?

This criterion assesses the consistency and reliability of dividend payments, which is crucial for income-focused investors.

Gilead Sciences (GILD) started paying dividends in 2015 at $1.29 per share and has continuously increased the dividend to $3 in 2023. This consistent increase in dividend payout is a positive trend for income-seeking investors. No year experienced a drop in dividend payments by 20%, indicating stability. This is a good trend for dividend sustainability.

Dividends Paid for Over 25 Years?

Explain the criterion for Gilead Sciences (GILD) and why it is important to consider

Explain why it is crucial for Gilead Sciences (GILD) to have paid dividends for over 25 years, and if the company meets that criterion based on the provided data, and why this trend is considered either favorable or unfavorable based on additional insights.

Reliable Stock Repurchases Over the Past 20 Years?

criterion for Gilead Sciences (GILD) and why it is important to consider

Gilead Sciences (GILD) buyback activities over the past 20 years are essential for investors to evaluate as they indicate the company's commitment to returning value to shareholders and optimizing capital structure. Reliable stock repurchase programs can also bolster confidence among investors, serve as a lever to improve earnings per share (EPS), and signal management's positive outlook on the company's future performance.