Why You (And Another Company) Should Buy Gilead - Dividend Sensei

| About: Gilead Sciences, (GILD)

Summary

Gilead's free cash flow prospects.

Company's track record, culture, R&D, manufacturing process, patent portfolio, and pipeline.

Adam's price targets for Gilead.

Who might purchase Gilead and for how much.

How he plans to respond if price falls any further.

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I sit down with Adam, the "Dividend Sensei," to discuss Gilead (NASDAQ:GILD). Adam provides a fire-hydrant blast of information and expectations regarding Gilead, including some thoughts on the possibility of the company being acquired.

If you'd like to jump ahead in the interview to the discussion on Gilead's acquisition prospects, it begins around the 20-minute mark.

A quick overview:

  • Gilead's free cash flow prospects.
  • Company's track record, culture, R&D, manufacturing process, patent portfolio, and pipeline.
  • Adam's price targets for Gilead.
  • What buyer might purchase Gilead and for how much.
  • How Adam plans to respond if price falls any further.
  • Much more...

I hope you enjoy this interview.

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Final Thought And Offer

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Interview Preview

Brian:

Adam, welcome to the show.

Adam:

Thanks for having me on, Brian.

Brian:

Honor to have you with us. I'm excited about today's topic. Recently you wrote an article titled, You'll Never Guess the Biggest Risk Facing Gilead Investors. That definitely piqued my interest. You wrote a great article, and obviously a lot of other people were very engaged in the conversation that you created or started. I would love to bring that conversation to our listeners here on the Investor in the Family Radio Show. Do you mind giving us a brief thesis or overview of what the article was about?

Adam:

Sure, Brian. Basically, from a long term dividend growth perspective, it's a value-based approach, much like what Warren Buffett does where you're looking for great companies with great management and a great track [inaudible 00:00:48] record. From time to time the market gets irrational. Things sell off. The key is you want to locate what's cheap, and then dig down deep and see what is the market saying? What's the actual potential in terms of future cash flows and how that applies dividend of course, because if free cash flow per share is growing, then that allows you to grow the dividend over time. Studies show a good rule of thumb for a long term projected returns is yield plus dividend growth. If you can have a nice, healthy, secure dividend that's growing over time, that's pretty much all you need to end up beating the market, and whether you're looking for income or total returns, whatever your goals are. For example like in retirement versus you're young and just trying to save up and build up a nest egg so that you can retire, dividend investing is a great way to go about it.

Gilead, it popped up on my radar when it started a few years ago paying a dividend. It's free cash flow payout ratio is extremely low at fifteen percent. They just raised it about eight and a half percent after the first year. They show some good, strong growth. With the payout ratio as low as it is, I could easily see them growing it at double digits for a long time to come. If you look at the yield, about two and a half percent with around ten percent growth potential, that's about twelve and a half percent projected returns that you could realistically expect. That's about fifty-five percent greater than the market's historical return. That instantly put it on my radar. Then when I looked into it, it's like you got a very solid track record. They've been around for twenty-nine years. The thing that I really like is the corporate culture that spans multiple generations of management where you have disciplined approach to [R&D 00:02:56].

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Disclosure: This article is for information purposes only. Comments made by my guests do not necessarily represent the views of Brian or Investor in the Family. There are risks involved with investing including loss of principal. Brian and Investor in the Family make no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed by Brian and Investor in the Family will be met.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.