Why Eli Lilly (LLY) is a Top Dividend Stock for Your Portfolio
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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) is headquartered in Indianapolis, and is in the Medical sector. The stock has seen a price change of 12.58% since the start of the year. The drugmaker is currently shelling out a dividend of $0.74 per share, with a dividend yield of 2%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.57% and the S&P 500's yield of 2.03%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.96 is up 14.7% from last year. Eli Lilly has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.30%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 46%. This means it paid out 46% 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 $6.81 per share, with earnings expected to increase 12.75% 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. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that LLY is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Eli Lilly and Company (LLY) : Free Stock Analysis Report
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