Eli Lilly (NYSE:LLY) Is Paying Out A Larger Dividend Than Last Year

By
Simply Wall St
Published
January 28, 2022
NYSE:LLY
Source: Shutterstock

The board of Eli Lilly and Company (NYSE:LLY) has announced that it will be increasing its dividend on the 10th of March to US$0.98. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Eli Lilly

Eli Lilly's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Eli Lilly was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 15.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:LLY Historic Dividend January 28th 2022

Eli Lilly Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from US$1.96 to US$3.92. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Eli Lilly has impressed us by growing EPS at 23% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Eli Lilly's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Eli Lilly that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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