Based on Tuesday’s closing prices, Gilead’s new dividend gives the company a yield of 1.6% while the new buyback represents over 9% of the company’s $161.7 billion market value.
Gilead’s dividend plans may have initially irked investors. After all, biotech stocks, even behemoths like Gilead, receive growth stock treatment and some investors might interpret a new dividend from a growth company as that firm waving the white flag on growth.
However, there is precedent for biotech dividends that should assuage skittish BBH and IBB investors. In the third quarter of 2011, Amgen paid its first cash dividend. The payout has since more than doubled while the stock has nearly tripled. Obviously, there have been many more catalysts, but since Amgen paid its first dividend, BBH and IBB have returned an average of 233%. [Behind the Dominance of Health Care ETFs]
Market Vectors Biotech ETF