We recently compiled a list of the 10 Unstoppable Dividend Stocks to Buy. In this article, we will have a look at where Eli Lilly and Company (NYSE:LLY) ranks among other unstoppable dividend stocks to buy.
It’s undeniable that dividends have played a key role in the market’s returns over the past year. While they hit a rough patch for a bit, these stocks still have plenty of room to grow. Their rising significance is tied to the fact that US companies are boosting their dividend payouts, thanks to strong cash flow. Many US firms, particularly in the tech sector, have substantial cash reserves on their balance sheets. Due to this, several major tech companies have introduced dividend policies this year, sparking renewed interest in dividend stocks.
In addition, with the market shifting away from top-performing stocks and the Federal Reserve likely to reduce interest rates, dividend stocks remain a valuable option for investors seeking solid returns. Dan Lefkovitz, a strategist for Morningstar Indexes, also supported investing in dividend stocks this year. Here are some comments from the analyst:
“Investing in dividend-paying stocks is a good way to participate in equities over the long term. There have been long stretches when the dividend-paying section of the market has outperformed. Eventually, they’ll come back into favor.”
When it comes to dividend stock investing, the attention is often split between high yields and dividend growth. Analysts tend to favor dividend growth, as it offers a more reliable income stream. In contrast, high yields can sometimes be misleading, hinting at potential financial difficulties. A report from RBC Wealth Management highlights that high-yield stocks have been lagging behind those with lower yields this year. By July 2024, stocks yielding less than 1% delivered an average return of 18%, significantly outperforming the 0.9% average return of stocks yielding over 3%. The report also mentioned that the Dividend Aristocrats, companies that have raised their payouts for at least 25 consecutive years, have historically performed well both during and after economic downturns. Their success is built on appealing valuations relative to the broader market and business models that have proven durable in the face of economic uncertainty. Currently, these equities are trading at a trailing twelve-month P/E of 24.95, which indicates confidence in the stability and growth of these companies.
Several reports have highlighted that while dividend growth companies might not deliver instant gratification, they provide significant long-term advantages. Nuveen, an Illinois-based financial planning firm, also expressed a positive view on dividend growth strategies this year, noting their strong historical track record. The report emphasized that companies focused on growing their dividends possess qualities that pave the way for solid performance in the future. Over the long haul, companies that consistently boost or introduce dividends have outpaced other market segments, achieving higher annualized returns with less volatility. While they may not always shine in every market condition, their steady, risk-adjusted returns over time make them a cornerstone for any equity portfolio—truly a case of “slow and steady wins the race.” With that, we will take a look at unstoppable stocks that pay dividends.
Our Methodology:
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with year-to-date (YTD) gains of at least 30%, as of the close of September 9. The stocks were then arranged in ascending order of their YTD gains.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. 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).
Eli Lilly and Company (NYSE:LLY)
Year-to-Date Return as of September 9: 52.3%
Eli Lilly and Company (NYSE:LLY) is an American pharmaceutical company, based in Indiana. The company manufactures and develops a wide range of medicines for serious ailments. The recent surge in optimism about the stock is mainly attributed to strong sales of three key products: Mounjaro, Zepbound, and Verzenio. Sales for the popular breast cancer medication Verzenio soared 44% in the second quarter of 2024. However, investors were even more enthusiastic about the performance of Mounjaro and Zepbound, which are used for diabetes treatment and weight loss. Since the start of 2024, the stock has gained over 52%, becoming one of the best unstoppable stocks that pay dividends.
In Q2 2024, Eli Lilly and Company (NYSE:LLY) reported revenue of $11.3 billion, which saw a 36% growth from the same period last year. The company increased its revenue forecast for the full year 2024 by $3 billion, now projecting a range between $45.4 billion and $46.6 billion. This upward revision was largely credited to the impressive performance of Mounjaro and Zepbound.
Baron Funds also appreciated the stock’s outperformance this year and highlighted this in its Q2 2024 investor letter. Here is what the firm said:
“Shares of global pharmaceutical company Eli Lilly and Company (NYSE:LLY) increased on continued investor enthusiasm around GLP-1 drugs for diabetes and obesity. We remain shareholders. Lilly’s Mounjaro/Zepbound not only offers superb blood sugar control for diabetics but can drive 20%-plus weight loss and likely improve cardiovascular outcomes in both diabetic and non-diabetic obese patients. Lilly is developing next generation drugs, including retatrutide, which drives approximately 25% weight loss, and orforglipron, a daily pill that produces approximately 15% weight loss. In the U.S. alone, there are 32 million Type 2 diabetics and an additional 105 million obese patients who we estimate would qualify for GLP-1 drugs. Although supply and access are limited near term, we think GLP-1 drugs will become standard of care for both diabetes and obesity and will become a $150 billion-plus category. We see Lilly setting a high efficacy bar and capturing significant long-term market share. We think the adoption of GLP-1s will drive Lilly to triple total revenue by 2030.”
Eli Lilly and Company (NYSE:LLY) is also a strong dividend company, having raised its dividends for 10 years consistently. Moreover, in the past five years, the company has raised its payouts by over 15%. It currently pays a quarterly dividend of $1.30 per share and has a dividend yield of 0.57%, as of September 9.
Eli Lilly and Company (NYSE:LLY) was a part of 100 hedge fund portfolios at the end of Q2 2024, down from 109 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a total value of over $16 billion. Fisher Asset Management owned the largest stake in the company, worth over $4.4 billion.
Overall, LLY ranks 5th on our list. While we acknowledge the potential for LLY to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
