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How Does Gilead Sciences Return Capital to Shareholders?

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Capital to shareholders

In 3Q15, Gilead Sciences returned capital to shareholders through share repurchase programs, cash dividend programs, and warrants repurchases. The company has returned approximately 77% of free cash flows to shareholders between January 2010 to September 2015.

The above diagram shows the share and warrant repurchase programs that Gilead Sciences completed in 2015.

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Share repurchase program

Similar to peers such as Amgen (AMGN), Biogen (BIIB), and Celgene (CELG), Gilead Sciences (GILD) also returns a substantial portion of its cash flows to shareholders through share repurchase programs. In January 2015, the company authorized $15 billion in share repurchase programs. In 3Q15, Gilead Sciences repurchased 27.6 million shares worth $3.1 billion while $11.1 billion in authorization still remained on September 30, 2015. Share repurchases lead to an increase in EPS (earnings per share) in future financial periods, as earnings are distributed among fewer shares, which adds value to the remaining shareholders.

Cash dividend program

In 3Q15, Gilead Sciences paid a quarterly dividend of $0.43 per share. The company also announced 4Q15 dividends of $0.43 per share to be paid on December 30, 2015.

Warrants repurchase

In 2Q15, Gilead Sciences repurchased 46 million warrants related to 2016 convertible bonds for $3.9 billion. This transaction reduced the total number of shares outstanding by 32 million shares. Reduction in outstanding shares also helps to increase earnings per share for remaining shareholders. As of September 30, 2015, the company had 9 million warrants outstanding.

Instead of directly investing in Gilead Sciences and being exposed to excessive company-specific risks, you can invest in the company through the Vanguard Growth ETF (VUG). Gilead Sciences accounts for about 1.6% of VUG’s total holdings.

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