Eli Lilly and Company (NYSE:LLY) looks like a good stock, and it will soon be ex-dividend

Readers hoping to buy Eli Lilly and company (NYSE:LLY) for its dividend will have to come shortly, as the stock is set to trade ex-dividend. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement which does not appear on the record date. Therefore, if you buy shares of Eli Lilly on or after February 14, you will not be eligible to receive the dividend when it is paid on March 10.

The company’s next dividend payment will be $0.98 per share, following last year when the company paid a total of $3.92 to shareholders. Looking at the last 12 months of distributions, Eli Lilly has a yield of about 1.6% on its current share price of $239.91. Dividends are a major contributor to investment returns for long-term holders, but only if the dividend continues to be paid. So we need to consider whether Eli Lilly can afford its dividend and whether the dividend could increase.

See our latest analysis for Eli Lilly

If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Eli Lilly pays out an acceptable 56% of its profits, a common payout level for most companies.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

NYSE:LLY Historic Dividend February 9, 2022

Have earnings and dividends increased?

Companies with strong growth prospects are generally the best dividend payers because it is easier to increase dividends when earnings per share improve. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to sell strongly at the same time. For this reason, we are pleased to see that Eli Lilly’s earnings per share have increased by 19% per year over the past five years. Eli Lilly pays out just over half of its profits, suggesting the company is finding a balance between reinvesting in growth and paying dividends. Given the rapid growth rate of earnings per share and the current level of payout, there could be a possibility of further dividend increases in the future.

Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Eli Lilly has recorded dividend growth of 7.2% per year on average over the past 10 years. It’s encouraging to see the company increasing its dividends as earnings rise, suggesting at least some corporate interest in rewarding shareholders.

Last takeaway

From a dividend perspective, should investors buy or avoid Eli Lilly? Eli Lilly has an acceptable payout ratio and its earnings per share have improved at a decent pace. In summary, Eli Lilly looks promising as a dividend stock, and we suggest you take a closer look.

On that note, you’ll want to research the risks that Eli Lilly faces. Our analysis shows 1 warning sign for Eli Lilly and you should be aware of this before buying stocks.

If you’re looking for dividend-paying stocks, we recommend checking out our list of the best dividend-paying stocks with a yield above 2% and an upcoming dividend.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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