Eli Lilly and Company: A Promising Dividend Stock Backed by Hedge Funds
AInvestSaturday, Feb 1, 2025 3:06 pm ET
4min read
LLY --


Eli Lilly and Company (LLY) has long been a favorite among hedge funds, with many prominent investors recognizing its potential as a dividend stock. The pharmaceutical giant's consistent dividend history, strong financial performance, and promising pipeline have made it an attractive choice for income-focused investors. In this article, we will explore the reasons behind hedge funds' interest in Eli Lilly and discuss whether it is indeed the most promising dividend stock according to these savvy investors.



Dividend History and Growth

Eli Lilly has a rich history of paying dividends, with the first record in 1972. The company has consistently increased its dividend over the years, with a 10-year dividend growth rate of approximately 14.7%. This growth rate is comparable to other pharmaceutical companies and the broader market. As of February 2025, Eli Lilly's annual dividend is $6.00 per share, with a yield of 0.74%. While the yield may not be the highest, the company's dividend growth potential and strong financial performance make it an appealing choice for income-focused investors.



Financial Performance and Cash Flow

Eli Lilly's strong financial performance enables it to distribute dividends to shareholders. In 2021, the company reported total revenue of $29.5 billion, a 20% increase from the previous year. Eli Lilly also generates substantial free cash flow, which can be used to fund dividends, share repurchases, and other investments. In 2021, the company generated $7.5 billion in free cash flow, demonstrating its ability to support its dividend payments and reinvest in growth opportunities.

Growth in Key Therapeutic Areas

Eli Lilly's dividend growth is also supported by the success of its key therapeutic areas, such as diabetes, oncology, immunology, and neuroscience. For example, the company's diabetes franchise, which includes Trulicity, generated $11.2 billion in revenue in 2021, a 27% increase from the previous year. This growth in key therapeutic areas contributes to Eli Lilly's overall financial performance and dividend growth potential.

Innovative Pipeline

Eli Lilly's dividend growth is further bolstered by its innovative pipeline of new drugs and therapies. The company has a strong track record of developing and commercializing new products, which can drive long-term growth. For instance, Eli Lilly has several late-stage pipeline assets, such as orforglipron and retatrutide, which have the potential to expand the company's product portfolio and drive future growth.



Hedge Funds' Interest in Eli Lilly

Hedge funds' investment strategies and portfolio allocations significantly influence their interest in Eli Lilly as a dividend stock. Income-oriented funds are attracted to Eli Lilly's consistent dividend history and current yield of 0.74%. Additionally, growth-focused funds may be interested in Eli Lilly's dividend growth potential and strong financial performance. Some hedge funds may also view Eli Lilly as a way to gain exposure to the pharmaceutical industry, which is known for its stable earnings and dividend growth.

Conclusion

Eli Lilly and Company is a promising dividend stock, backed by its strong financial performance, consistent dividend history, and growth potential in key therapeutic areas. The company's innovative pipeline and cash flow generation further support its dividend growth and make it an attractive choice for income-focused investors. While the company's dividend yield may not be the highest, its growth potential and strong financial performance make it a compelling option for hedge funds and other investors seeking steady income and capital appreciation. As Eli Lilly continues to execute on its strategic initiatives and maintain its competitive position in the pharmaceutical industry, it is well-positioned to deliver long-term growth and dividend increases.
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