3/8/25
Eli Lilly & Co. (NYSE: LLY) is one of the most well-established names in the pharmaceutical industry. Founded in the 1800s, the company has built a reputation for developing innovative drugs, particularly in diabetes, oncology, and immunology. Recently, its stock has skyrocketed, fueled by demand for its GLP-1 weight-loss and diabetes treatments.
For dividend investors, however, the appeal of LLY is a bit more nuanced. While the company has a long track record of rewarding shareholders, its dividend yield is relatively low. But with consistent increases and a strong growth outlook, it still deserves attention. Let’s dive into its dividend metrics, financial health, and whether it makes sense as an income investment.
Key Dividend Metrics
💰 Dividend Yield: 0.66% – Not high, but consistent with growth stocks
📈 Dividend Growth: More than 15% annually over the last five years
🛡️ Payout Ratio: 44.41% – Sustainable with room for growth
📅 Next Dividend Date: March 10, 2025
📉 5-Year Average Yield: 1.17% – Historically higher than today’s level
⚖️ Debt/Equity Ratio: 244.62% – Higher than ideal, but manageable
Dividend Overview
At first glance, Eli Lilly doesn’t seem like an obvious choice for dividend investors. With a yield under 1%, it’s far from a high-income play. But dig a little deeper, and the appeal starts to make sense.
The company has been paying dividends for decades without interruption. More importantly, it consistently increases its payout. Just recently, the annual dividend was raised from $5.20 to $6.00 per share—a solid 15% boost. That kind of growth adds up over time, especially for investors reinvesting their dividends.
One point to note is that the current yield is lower than its five-year average. This suggests that share price growth has outpaced dividend increases, which is a sign of strong investor demand but not ideal for those looking for immediate income.
Dividend Growth and Safety
Eli Lilly’s dividend appears to be on solid footing, with strong financial backing to support further increases.
✔️ The company has been raising dividends aggressively, with a five-year growth rate above 15%.
✔️ A 44% payout ratio suggests plenty of room for future increases while still investing in new drug development.
❌ Debt levels are high, which could limit flexibility down the road.
While debt is something to watch, the company’s high earnings growth makes it less concerning. As long as revenue continues to rise, the dividend should remain well-funded.
Chart Analysis
Trend and Moving Averages
Eli Lilly’s stock has been in a strong uptrend for most of the past year, but there have been some notable pullbacks along the way. The 50-day moving average (light blue line) has been acting as dynamic support for much of the rally, though there was a period late last year when the price dipped below it. That period coincided with a larger correction that briefly took the stock under the 200-day moving average (dark blue line), but buyers quickly stepped in, pushing the stock back above.
Right now, the stock is trading above both the 50-day and 200-day moving averages, which generally suggests strength. The recent move higher has taken LLY back near previous highs, though today’s price action showed some selling pressure.
Volume and Market Participation
Volume spikes have been evident at key points in the chart. The most notable volume surge came in early November when there was a massive increase in trading activity. That period saw a steep drop in price, which indicates heavy institutional selling. However, the recovery that followed shows that buyers absorbed the selling pressure, preventing a prolonged decline.
More recently, volume has been steady but not extreme. Today’s trading volume of 4.68 million shares is in line with normal activity. It doesn’t suggest an overly strong conviction in either direction, meaning investors are still digesting price levels near all-time highs.
RSI and Momentum
The relative strength index (RSI) at the bottom of the chart has been hovering near the overbought zone, though it has started to turn lower. That suggests momentum was strong but may be cooling off slightly. Whenever RSI reaches these elevated levels, it signals that the stock may need a breather before making its next move.
It’s worth noting that RSI was much lower during the late-year correction, falling close to oversold conditions. That period provided a strong buying opportunity, as the stock quickly rebounded. Right now, it’s in the opposite position, where some profit-taking could emerge if momentum weakens further.
Recent Price Action and Candlestick Behavior
The last five candles show a mix of indecision and volatility. The most recent candle has a long upper wick, indicating that the stock attempted to push higher but faced resistance. That’s not necessarily a bearish sign, but it does show sellers stepping in near the $900 level.
The past few sessions have also had relatively large trading ranges, which suggests that there is some battle between buyers and sellers. If the stock can hold above key support levels, it could consolidate before making its next move. If not, it may retest support near the 50-day moving average.
Analyst Ratings
💹 Upgrades
Several analysts have raised their expectations for Eli Lilly, pointing to strong momentum in its key drug markets. 📈 On March 5, 2025, Wells Fargo increased its price target from 970 to 1,100, maintaining an overweight rating. This reflects growing confidence in the company’s leadership in the weight-loss drug space. 🏥 Similarly, on March 4, 2025, TD Cowen lifted its price target from 900 to 1,050, reaffirming a buy rating. The primary reason behind these upgrades is the continued success of Mounjaro and Zepbound, two treatments driving major revenue growth. Analysts see these drugs as game-changers in the diabetes and obesity markets, leading to expectations of sustained demand.
📉 Downgrades
Despite the optimism, some analysts have taken a more cautious approach. On January 28, 2025, Citigroup lowered its price target from 1,250 to 1,190 while maintaining a buy rating. This revision suggests concerns about valuation and potential competition in the fast-growing GLP-1 drug market. 🏦 On January 24, 2025, DBS Bank reduced its target from 1,115 to 900, though it still maintained a buy rating. These adjustments likely stem from inventory constraints and the challenge of scaling up production fast enough to meet surging demand.
📊 Consensus Price Target
As of the latest reports, the 12-month consensus price target for Eli Lilly stands at 1,000.28. 🔍 This suggests moderate upside potential based on a mix of bullish expectations and near-term concerns. While analysts remain positive about the company’s long-term growth, some believe the stock’s rapid rise has priced in much of the future potential.
Earning Report Summary
Eli Lilly closed out 2024 on a strong note, delivering impressive financial results that reflected the growing demand for its blockbuster medications. The company’s revenue jumped 45% in the fourth quarter, hitting $13.53 billion. This surge was largely fueled by the continued success of its diabetes and weight-loss treatments. On the bottom line, profits more than doubled, reaching $4.41 billion for the quarter.
Standout Performers
- Mounjaro, one of Eli Lilly’s biggest drivers, saw sales climb 60% to $3.53 billion. While that was slightly below some forecasts, the drug continues to be a major growth engine.
- Zepbound, a weight-loss treatment that has generated a lot of buzz, pulled in $1.9 billion for the quarter. Though some analysts expected even higher numbers, demand remains strong.
- Verzenio, a breast cancer medication, had a solid quarter as well, with sales rising 36% to $1.55 billion.
For the full year, Eli Lilly brought in $45.04 billion in revenue, a 32% increase from 2023. That kind of growth is rare for a company of this size and speaks to how well its key products are performing.
Looking Ahead
Management has high expectations for 2025, forecasting revenue between $58 billion and $61 billion. If they hit the midpoint of that range, it would mark another year of 30%-plus growth. Earnings per share are projected to land between $22.50 and $24.00, right in line with what Wall Street was expecting. The company is also gearing up to expand Mounjaro into major international markets like China, India, Brazil, and Mexico, which could add another layer of growth.
Potential Challenges
One thing to watch is how demand for weight-loss drugs plays out over time. Some analysts have noted a seasonal trend, where new prescriptions spike early in the year before slowing down later on—similar to gym memberships. If that pattern holds, it could impact sales expectations down the line.
All in all, Eli Lilly is in a strong position, with a dominant presence in some of the most lucrative areas of healthcare. As long as demand for its treatments continues at this pace, the company seems well-positioned for another big year.
Financial Health and Stability
LLY’s financials paint a picture of a company firing on all cylinders. Revenue and earnings growth have been outstanding, thanks largely to the success of its diabetes and obesity drugs.
- Revenue growth: 44.7% year over year, which is extremely strong for a large pharmaceutical company.
- Earnings growth: 101.4% year over year, an exceptional number fueled by demand for key drugs.
- Profit margin: 23.51%, which is healthy but slightly below some competitors.
- Operating cash flow: $8.82 billion, ensuring the company has enough to cover dividends and reinvest in R&D.
- Levered free cash flow: $1.32 billion, which is positive but shows that cash flow is being stretched.
If there’s one red flag here, it’s the company’s debt. With $34.91 billion in total debt and only $3.43 billion in cash, Lilly’s balance sheet is more leveraged than some investors might like. The good news is that strong revenue growth should help manage this over time.
Valuation and Stock Performance
This is where things get tricky. LLY is an excellent company, but it’s also one of the most expensive stocks in the market.
- Price-to-earnings ratio (P/E): 77.95, which is extremely high for a pharmaceutical stock.
- Forward P/E: 40.00, which is better but still expensive.
- PEG ratio: 1.34, suggesting fair value if high growth continues.
- Price-to-sales ratio: 18.32, much higher than industry norms.
Investors have been willing to pay a premium for Eli Lilly, pushing the stock to a 52-week high of $972.53. Given its high valuation, any slowdown in earnings growth could put pressure on the stock price. That doesn’t mean it’s overvalued, but it does mean expectations are very high.
For dividend investors, this creates a challenge. While the company’s fundamentals are strong, reinvesting dividends at today’s high prices may not be ideal unless earnings continue growing rapidly.
Risks and Considerations
No investment is without risks, and Eli Lilly is no exception.
🚨 Valuation is extremely high – At a P/E above 75, the stock is priced for perfection. If growth slows or investor sentiment shifts, it could face volatility.
💊 Competition in the weight-loss market is fierce – Novo Nordisk and other pharmaceutical giants are racing to catch up. Any missteps could impact future growth.
📉 Dividend yield is low – For those seeking high income, other stocks may be better suited.
💰 Debt levels are elevated – While manageable now, continued borrowing could create financial strain.
Final Thoughts
Eli Lilly is one of the most exciting companies in the pharmaceutical space, but from a dividend investor’s perspective, the decision isn’t as straightforward. The dividend is growing rapidly, but the yield is low, and the stock is expensive.
For long-term investors focused on dividend growth, it remains an attractive option. However, those looking for immediate income may find better opportunities elsewhere. With a strong drug pipeline and a history of rewarding shareholders, LLY is a stock worth watching, but patience may be required at current valuations.
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