We recently compiled a list of the 10 Dividend Zombies and Kings with Longest Dividend Payouts. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against the other dividend stocks.
Last year, artificial intelligence (AI) was the main focus in the markets, driving tech stocks to the forefront. These stocks rose by nearly 56%, accounting for the majority of the market’s gains. However, these trends quickly lose popularity once they emerge. Experienced long-term investors understand a crucial principle: while chasing short-term investment trends can often lead to disappointment, committing to a long-term strategy can yield success. As AI-related companies drove the market upward, the valuations of high dividend-paying companies quietly declined in comparison. It is not about attractive valuations of dividend stocks, these stocks also offer diversification benefits and the potential for a growing income stream, especially if the Fed decides to lower interest rates, making them a strong investment option. These stocks become more attractive when companies have a solid history of consistently paying and increasing their payouts. Read our list of Best Dividend Kings to Buy for Safe Dividend Growth.
Dividend zombies are companies that have paid dividends to shareholders for at least 100 consecutive years whereas dividend kings are companies boasting 50 years of dividend growth. Dividend growers have shown strong performance over the years, often surpassing the overall market returns. The Dividend Aristocrats index, which tracks the performance of companies with 25 consecutive years or more, has outperformed the broader market since its inception in 2005, with lower levels of volatility. Historically, the index has captured 90% of the market’s upward movements while experiencing only 82% of its declines. Currently, the Aristocrats are trading at a price-to-earnings multiple that is more than 10% lower than that of the broader market. This discount level has historically preceded prolonged periods of superior performance by the Aristocrats.
Since the end of 1989, there have been six calendar years where the broader market experienced negative performance. In each of these years, the Dividend Aristocrat index surpassed the performance of the broader equity benchmark by an average of 13.28%. Remarkably, the aristocrats delivered positive total returns in three of those years.
Given investors’ preference for dividend stocks, companies listed in the broader market indices are consistently increasing and sustaining their dividend payments. In the first quarter of 2024, the S&P’s main index distributed $151.6 billion in dividends, compared to $146.8 billion in Q1 2023. There were 796 reported dividend increases in the first quarter, totaling $22.7 billion, up from $19.7 billion in the prior-year period.
The impressive returns of dividend growers clearly demonstrate their strong performance. In this article, we will take a look at dividend zombies and dividend kings to invest in.
Our Methodology:
For this list, we selected companies that have paid dividends for over 100 years and also have strong dividend growth histories. Some of these companies are dividend kings, which means that they have raised their payouts for 50 years or more. We also considered the hedge fund sentiment around each stock, according to Insider Monkey’s database for Q1 2024. The stocks are ranked in ascending order of the consecutive years of dividend payments. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An array of pharmaceutical pills with the company’s logo on the bottle.
Eli Lilly and Company (NYSE:LLY)
Consecutive Years of Dividend Payments: 139
Eli Lilly and Company (NYSE:LLY) ranks sixth on our list of the best dividend zombies. The global pharmaceutical company that manufactures and develops a wide range of medicines for serious ailments. In the first quarter of 2024, the company reported revenue of $8.77 billion, which showed a 26% growth from the same period last year. This growth in revenue was thanks to the success of two new drugs: Zepbound, approved for weight loss, and Mounjaro, approved for diabetes. The company’s advancements in tackling some of the world’s major healthcare issues have led to a higher demand for its medicines.
Eli Lilly and Company (NYSE:LLY) also grew its gross margins by 33% on a year-over-year basis to $7.09 billion. The company has strong fundamentals and a portfolio of highly successful products. According to analysts, while the stock might be volatile in the short term due to market fluctuations, significant growth is anticipated in the weight loss, diabetes, and Alzheimer’s markets. Since the start of 2024, the stock has gained nearly 13% and in the past five years, the stock delivered a 50.6% return.
On May 6, Eli Lilly and Company (NYSE:LLY) declared a quarterly dividend of $1.30 per share, which was in line with its previous dividend. In 2023, the company achieved its 10th consecutive year of dividend growth. Moreover, it has been making regular dividend payments to shareholders since 1885, which makes it one of the best dividend zombies on our list. The stock’s dividend yield on June 20 came in at 0.59%.
Baron Funds highlighted Eli Lilly and Company (NYSE:LLY)’s new drugs and the company’s overall performance in its Q1 2024 investor letter. Here is what the firm has to say:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
The number of hedge funds tracked by Insider Monkey owning stakes in Eli Lilly and Company (NYSE:LLY) grew to 109 in Q1 2024, from 102 in the previous quarter. The total value of these stakes is over $13.6 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q1.
Overall LLY ranks 6th on our list of the dividend zombies and kings with longest dividend payouts. You can visit 10 Dividend Zombies and Kings with Longest Dividend Payouts to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of LLY as an investment, our conviction lies in the belief that deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is as promising as LLY but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.