Gilead Sciences Has Raised Its Dividend for 11 Straight Years. Here's Why the Streak Looks Safe.

Gilead Sciences (NASDAQ: GILD) is the leading pharmaceutical company that produces HIV treatments. Its chronic HIV management therapies are largely insulated from macroeconomic downturns because of how crucial they are to those with the disease.

Gilead raised its quarterly dividend by 3.8% this year to $0.82, the 11th consecutive year it has increased its dividend. The dividend yield, at Gilead's current share price, is around 1.9%, nearly double the S&P 500 (SNPINDEX: ^GSPC) average. The company has increased its dividend by just under 75% over the past decade.

Gilead is in a great position to continue raising its dividend. Let's see why.

Its free cash flow easily covers its dividend

Gilead's cash dividend payout ratio is only 29.8%, indicating it has ample room to maintain its dividend and fund other operations.

The driver of that cash is the company's HIV franchise. In the third quarter, the company reported $8.3 billion in revenue, up 13% year over year, led by 18% higher HIV sales compared to the same period a year ago and HIV prevention therapies, whose sales nearly doubled year over year.

Over nine months, the company reported $10.6 billion in free cash flow, up 68% year over year.

Its efforts to broaden its portfolio are paying off

In recent years, Gilead has expanded into oncology and anti-inflammatory treatments. It just opened a new research center to grow its oncology, inflammation, and research data science, and it has said it plans to spend $32 billion in projects through 2030 to support research.

Trodelvy, used to treat bladder cancer and breast cancer, brought in $506 million in the third quarter, up 42% year over year. The drug was also recently approved as a combination therapy with Keytruda, made by Merck, as a first-line treatment for a very aggressive form of breast cancer.

The company also has more than a dozen inflammation and immunology drugs in clinical testing, most notably emvistegrast, which recently showed a 66% response rate in patients with ulcerative colitis.

James Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Gilead Sciences and Merck. The Motley Fool has a disclosure policy.