December 12, 2016
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – Are you looking for a Christmas present that keeps on delivering? How about an extra $30,000 per year sound? It’s possible with a significant investment in California-based Gilead Sciences .
Such an annual bonus is possible. Writing in the Motley Fool, analyst Keith Speights said all it will take for that extra $30,000 in annual income is an initial investment of $50,000 and allowing about 20 years for growth. Speights said the way this would work out is due to the dividends the company provides. Gilead pays an annualized dividend of $1.88 per share. With the $50,000 investment, Speights said that would buy about 690 shares of Gilead Sciences. In the first year, a shareholder will receive about $1,300 in dividends over the next year. But, don’t take the dividends and go on a vacation. Speights said a shareholder must continue to reinvest the dividends into more Gilead shares—“quarter after quarter and year after year.”
While that seems simple, Speights said Gilead would also need to do its part. He said Gilead raised its dividend by 10 percent earlier this year and shareholders would need for Gilead to continue to do so annually. Even if the stock does not increase in price over the next 20 years, Speights said “the compounding effect of reinvested dividends combined with dividend increases would give you an annual income of around $30,000 from that initial investment.”
While in theory Speights’ idea would work, he quickly writes that it will not happen. He said the company is likely to see periods of growth and possibly some decline as its HCV pipeline stabilizes. Last week, Gilead filed a New Drug Application with the U.S. Food and Drug Administration to expand that pipeline. The company is seeking approval for its investigational, once-daily single tablet regimen for the treatment of direct-acting antiviral (DAA)-experienced chronic hepatitis C virus (HCV)-infected patients. The tablets are a combination of sofosbuvir, velpatasvir and voxilaprevir.
The company could see some strong growth too, through new drugs and possible M&A activity. Gilead has a cash stockpile of about $30 billion it could use to snap up promising drug companies.
The company has also seen its share of setbacks this year. Last week, BioSpace outlined some some mistakes the company made in 2016, which included a failure to not increase the dividend enough. The company also failed to use some of that cash stockpile to make acquisitions—deals that would provide investors with confidence in future growth of the company.
Shares of Gilead are currently trading at $72.75 as of 11 a.m.
