Gilead is the HIV treatment market leader with a 75% share of the US market.
It also provides a very attractive dividend yield supported by robust free cash flow profitability.
We discuss whether Gilead stock is a buy for dividend income investors.
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Gilead Sciences, Inc. ( GILD ) is a solidly profitable biotechnology company. It is also the market leader in HIV treatment products. Moreover, it has also benefited from the COVID-19 pandemic through its Remdesivir COVID-19 antiviral drug. Notably, it has helped to shore up its relatively stagnant revenue growth trend. In addition, its stock price has been in a highly volatile consolidation phase since 2017. Notwithstanding, the stock comes with an attractive dividend yield that could be beneficial for dividend-seeking investors.
We discuss whether the company’s robust profitability and its solid dividend yield make it a buy now. GILD Stock YTD Performance
GILD stock YTD performance (as of 2 November 21).
GILD stock has had a pretty decent year even though it underperformed the broader market. The stock’s YTD gain of 15.5% is behind the SPDR S&P 500 ETF’s ( SPY ) YTD return of 25.2%. Moreover, the stock trails The Health Care Select Sector SPDR ETF’s ( XLV ) YTD gain of 20.7%.
However, GILD stock has outperformed its industry peers in general. The SPDR S&P Biotech ETF’s ( XBI ) YTD return of -12.5% significantly underperformed the market this year. Therefore, GILD stock has been one of the bright spots among its peers so far. Gilead’s HIV Treatment Revenue Has Been Recovering Well
Selected top HIV/AIDS drugs worldwide based on revenue by FY. Data source: Various sources (company data); Statista Gilead total & HIV drugs revenue by quarter. Data source: S&P Capital IQ, Company filings
Gilead remains the world’s foremost HIV drugs company. The company highlighted that they commanded a 75% share in the HIV treatment market in FQ3. Moreover, the company expects a continued recovery in its HIV revenue as the reopening cadence gains traction.
Readers can also easily observe the recovery in its HIV revenue from FQ2. Importantly, we can also follow the leadership and dominance of its products in the HIV treatment market from the first chart.
Notably, its total revenue has been driven mainly by its HIV drugs. Therefore, the recovery in its critical segment augurs well for Gilead moving forward. Veklury (Remdesivir) quarterly revenue. Data source: Company filings
Notwithstanding, Remdesivir has also lifted the company’s revenue over the last five quarters. Even though the efficacy of the treatment has been debated, usage continues to be strong. However, we believe that the surge in its FQ3 revenue needs to be monitored. Volatility in its application is likely expected to be affected by the frequency of hospital admissions. Weekly new hospital admissions for COVID-19 in selected countries. Source: OWID
Readers can easily observe the highly volatile patterns of COVID-19 hospitalizations across different countries. We believe that such experiences should be expected as unpredictable waves of infection take place and subside over time. Therefore, investors should continue to expect volatility in Remdesivir’s revenue moving forward. Hence, the continued recovery of Gilead’s HIV segment is fundamental to more consistent topline performance.
Nonetheless, any boost from Remdesivir is still welcome, as it has helped to shield the underperformance from the HIV drugs previously. Therefore, we should expect to see a reduction in topline volatility as HIV drugs maintain its recovery momentum. Gilead’s Robust Profitability Supports its High Dividend Yield
GILD stock LTM dividend yield. Data source: S&P Capital IQ Gilead stock has consistently delivered relatively high dividend yields over the years for its investors. The company is also on a six-year growth streak of having raised its dividends. As a result, its most recent yield of 4.4% places it well above the market’s top 25% of dividend-paying stocks. It’s also ahead of its biotech peers, which pays an average dividend yield of 2.7%. Gilead LTM gross margins and operating margins. Data source: S&P Capital IQ With such solid dividend yields, Gilead must have a fundamentally robust bottom line to support it. Notably, Gilead operates a highly profitable business model. Its dominant leadership in the HIV market has given it an enviable bottom line. Moreover, Remdesivir has also boosted its bottom line noticeably even as HIV revenue dipped in H1’21. As a result, Gilead reported an impressive last-twelve-months […]