Among the Big Pharma players out there, Eli Lilly (LLY) is one of the most attractive from an income perspective. It boasts a juicy 3.7% yield, better than either Pfizer (PFE) or Merck (MRK) but also a very low payout ratio.
And like the aforementioned P&G, health care and drugmakers are recession-proof as well, since patients will cut back on many other expenses before they skimp on medication that affects the quality of their lives.
And with the Affordable Care Act on the way, more folks are going to have access to doctors and medicine to help provide more “customers” to Lilly in the years ahead.
Lilly dividends currently are on track to tally less than half fiscal 2013 earnings forecasts. And beyond that, the company boasts $11.3 billion in cash and long-term investments.
Eli Lilly has paid dividends in some form since 1885. Although the dividend hasn’t been increased since 2009, the wiggle room in the payout ratio hints that at worst, the current rate is sustainable and at best, some increases might be around the corner.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.