Dividend hikes can give investors a great incentive to hang on to a stock for many years. A company that can afford to increase its dividend payments is one that is likely growing its business and its profits are strong. Without strong financials, after all, it would be difficult to distribute out more earnings to shareholders.
On Feb. 2, healthcare company Gilead Sciences (NASDAQ:GILD) announced that it would be increasing its quarterly dividend payment by 2.7%. Investors will now be collecting $0.75 per share, putting the yield at around 3.5%, which is well above the S&P 500 average of 1.7%. The company's payout ratio is now 80% based on its earnings. Although that's a bit on the high side, it still leaves room for Gilead to make more increases in the future. The company's dividend is now 32% higher than the $0.57 it was paying investors back in 2018, which equates to a compounded annual growth rate of 5.6% during that time.
For dividend investors, Gilead Sciences could make for a safe long-term investment as it is a leading company in HIV medication, it has strong financials, and its yield can be a great source of recurring income for your portfolio.
Shares of Gilead Sciences have risen more than 30% over the past year as it has been one of the better healthcare companies to invest in of late and it's now trading around its 52-week high. But despite the seemingly high price, it's still only trading at 12 times its future earnings (which is based on analyst expectations), suggesting that the stock remains a cheap buy right now.
