Eli Lilly (NYSE:LLY) Will Pay A Larger Dividend Than Last Year At $1.13
Eli Lilly and Company's (NYSE:LLY) dividend will be increasing from last year's payment of the same period to $1.13 on 10th of March. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.
See our latest analysis for Eli Lilly
Eli Lilly's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Eli Lilly was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
The next year is set to see EPS grow by 107.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.
Eli Lilly Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $1.96 total annually to $4.52. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. 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
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Eli Lilly has seen EPS rising for the last five years, at 25% per annum. 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. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Eli Lilly that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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