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This is Why Eli Lilly (LLY) is a Great Dividend Stock
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Eli Lilly in Focus
Eli Lilly (LLY - Free Report) is headquartered in Indianapolis, and is in the Medical sector. The stock has seen a price change of -4.03% since the start of the year. Currently paying a dividend of $0.74 per share, the company has a dividend yield of 2.35%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.63%, while the S&P 500's yield is 2.07%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.96 is up 14.7% from last year. Over the last 5 years, Eli Lilly has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.02%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Lilly's current payout ratio is 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.
LLY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $6.77 per share, with earnings expected to increase 12.09% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, LLY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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This is Why Eli Lilly (LLY) is a Great Dividend Stock
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Eli Lilly in Focus
Eli Lilly (LLY - Free Report) is headquartered in Indianapolis, and is in the Medical sector. The stock has seen a price change of -4.03% since the start of the year. Currently paying a dividend of $0.74 per share, the company has a dividend yield of 2.35%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.63%, while the S&P 500's yield is 2.07%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.96 is up 14.7% from last year. Over the last 5 years, Eli Lilly has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.02%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Lilly's current payout ratio is 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.
LLY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $6.77 per share, with earnings expected to increase 12.09% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, LLY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).