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If you're looking for a stock that looks ridiculously cheap and has a dividend to boot, then Gilead Sciences (NASDAQ:GILD) is definitely a contender. The company has grown earnings by a ridiculous 95% per year over the past three years, it trades for just 6 times trailing earnings, and it sports a solid 2.4% dividend yield.

So how safe is Gildead as an investment, and how safe is its dividend?

Let's start with the easy part: The dividend

If you're an income investor, there's no metric more important than free cash flow (FCF). This represents the amount of money a company generates from its business, minus capital expenditures. It is from FCF that dividends are paid; keeping tabs on it gives you an idea of how sustainable a dividend really is.

Over the past 12 months, the company has only used 15% of FCF to pay its dividend. That makes it incredibly safe, and it holds a lot of potential for future increases. Even back in 2013 -- when FCF was one-sixth of what it is now -- the company used less than 65% of FCF to pay its dividend.

Now on to the hard part: How safe is the company?

Most companies could never dream of such soaring FCF as Gilead enjoyed starting in 2014. But that's how things work in Big Pharma: You make one or two blockbuster drugs, and your income statement can change in the blink of an eye.

Our own Keith Speights did a great job of breaking down the bull and bear arguments for Gilead, but I'll summarize below.

Gilead experienced its surge in 2014 thanks to a combination of its Hepatitis C drugs (Sovaldi and Harvoni) and its HIV treatments. Since then, Merck (NYSE:MRK) has brought Zepatier, a direct competitor with Harvoni, to market. Zepatier is priced below Harvoni, and this has caused sales of the latter to slump 29%. Because Hepatitis C drugs combine to provide over half of Gilead's sales, this has investors spooked.

On the other hand, Keith points out that Gildead has a number of promising drugs in the pipeline, including Hep C and HIV treatments, as well as a breakthrough treatment for nonalcoholic steatohepatitis that could, by some estimates, achieve $12 billion in annual sales. If any one of these pipeline drugs is a success, it could make today's price tag of just $78 per share look very cheap.

How to navigate such situations

I'm not an investor in Big Pharma; the industry is too unpredictable for me. That means I reduce my unexpected downside risks, but it also means I've missed out on some huge winners. Gilead, for example, gained more than 500% between 2011 and 2015.

If you feel comfortable investing in a company like Gilead, then the time looks right. The company trades for a rock-bottom valuation. While the risk of losing significant Hep C sales could keep shares down, there's a lot of potential in the company's pipeline right now. What's more, you'll be paid a solid and very safe dividend between now and when we see the results coming from the pipeline.

All things considered, that's not a bad deal.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.