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Eli Lilly: A Rising Star for Dividend and Growth Investors

Dividend-focused investors often prioritize stocks with long histories of increasing payouts. However, a lengthy streak alone doesn’t guarantee strong returns, as incremental increases may fail to outpace inflation.

Eli Lilly, on the other hand, stands out with its consistent double-digit dividend growth and significant potential for future rate hikes, making it a compelling choice for both income and growth investors.

Consistent and Impressive Dividend Growth

On December 9, Eli Lilly announced a 15% increase in its quarterly dividend, marking the seventh consecutive year of such substantial hikes. The new payout of $1.50 per share is 167% higher than what the company offered in 2018. Additionally, a $15 billion share buyback program highlights the company's commitment to delivering value to shareholders.

While Eli Lilly's dividend growth streak isn’t as long as some Dividend Kings, its recent performance outshines many of them. Unlike companies that increase payouts marginally to maintain streaks, Eli Lilly’s robust dividend hikes are backed by strong financial results and a promising outlook.

Bright Prospects for Continued Dividend Increases

The key to sustainable dividend growth lies in the company’s financial health and growth potential. Eli Lilly's portfolio includes blockbuster drugs like Zepbound and Mounjaro, which target weight loss and diabetes, generating billions in revenue. Additionally, the recent approval of its Alzheimer's treatment, Kisunla, adds another promising growth driver.

With these treatments in their early stages of market adoption, Eli Lilly's revenue is poised for continued growth. In the third quarter alone, revenue rose 20% to $11.4 billion, while adjusted net income surged by over 1,000% year-over-year to $1.06 billion. Despite its rapid expansion, the company maintains a modest payout ratio of 54%, leaving ample room for future dividend increases.

Balancing Yield and Growth

Eli Lilly’s dividend yield of less than 0.8% might seem modest, particularly compared to the S&P 500’s average yield of 1.2%. However, this low yield is a reflection of the stock's remarkable price appreciation, which has exceeded 500% over the past five years.

For long-term investors, the potential for both growing dividend income and capital gains makes Eli Lilly a standout option. Analysts expect its adjusted earnings per share to jump from $13.15 in 2024 to $22.60 in 2025, further underscoring its growth trajectory.

A Path to Even Greater Heights

Eli Lilly, currently the most valuable U.S. pharmaceutical company with a market cap of $689.5 billion, is well-positioned for future growth. Its third-quarter results and expanding addressable markets suggest that reaching a $1 trillion market cap is within reach, especially as demand for its weight-loss and diabetes treatments continues to rise.

Conclusion

Eli Lilly offers a unique blend of income and growth potential, making it an exceptional choice for long-term investors.

With its impressive dividend growth, robust financial health, and promising product portfolio, the stock is more than just a good dividend pick—it’s a compelling investment for those seeking both stability and growth in their portfolio. Ignoring its potential due to its current yield could be a costly oversight.

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