If you had bought $1,000 worth of stock in Eli Lilly (LLY -1.81%) or UnitedHealth Group (UNH 0.23%) a decade ago, you would have fared pretty well. Lilly's shares would now be worth $7,195, while that same $1,000 invested in UnitedHealth Group back in 2013 would be worth $10,298 now.
You may have missed out on those opportunities, but the two healthcare companies continue to be solid long-term investments, combining strong, consistent revenue and earnings per share (EPS) growth, along with dependable dividend increases.
1. Eli Lilly's pipeline prepares to replenish its portfolio
Eli Lilly's shares are up more than 22% over the past year and more than 470% over the past decade.
The company gained public goodwill when it recently announced it would cap out-of-pocket costs for insulin at $35, regardless of whether patients were insured or not. The move was shrewd because the company voluntarily did something that it, and other makers of insulin, may have been forced to do.
Plus, the company's insulin products, Humalog and Humulin, were declining anyway, falling 16% and 17%, respectively, in 2022 sales.
The company has increased its revenue for five consecutive years. In 2022, it reported $28.5 billion on the top line, up 1%, and earnings per share (EPS) of $6.90, up 12.7% over 2021.
The company has seven therapies with annual sales of more than $1 billion, led by Trulicity, which controls blood sugar levels and reduces the risk of strokes or heart attacks. It saw sales of $7.44 billion in 2022, up 15% over the prior year. Meanwhile, breast cancer drug Verzenio had 2022 sales of $2.48 billion, up 84%.
Other key growth products include Mounjaro, Jardiance, and Taltz. Mounjaro, a diabetes drug that is being used off-label for weight loss (though not approved as such yet by the Food and Drug Administration), was just approved by the FDA last June -- and in a little more than a quarter, it produced $279 million in sales. Jardiance is also meant to control blood sugar for patients with type 2 diabetes, and its 2022 revenue was $1.49 billion, up 39%. Taltz, an immunosuppressant that can reduce various types of inflammation, saw its 2022 sales rise 12% to $2.48 billion.
On top of that, Lilly said it expects to launch four new products this year. This includes cancer therapy Jaypirca, which was approved in January to treat relapsed or refractory mantle cell lymphoma by the FDA. Then there's mirikizumab for treating ulcerative colitis. Finally, Alzheimer's therapy donanemab and atopic dermatitis treatment lebrikizumab are awaiting word on whether they will be approved by the FDA.
The company issued guidance that says it expects 2023 revenue of $30.3 billion to $30.8 billion, an increase of between 6% to 8%, and EPS between $7.90 to $8.10, an increase of between 14.4% and 17.3%.
Lilly also has begun focusing more on its dividend, which it just raised by 15% to $1.13 per quarterly share, equaling a yield of around 1.28%. The company has raised its dividend for nine consecutive years. 2023 is the fifth consecutive year the company has increased its dividend by 15%, and that has allowed the dividend to double since 2018.
The payout ratio appears safe. Based on the lower estimate of expected earnings, the company's payout ratio for its dividend would be 57%, leaving plenty of room for coverage.
LLY Total Return Level data by YCharts.
2. UnitedHealth Group is a juggernaut
UnitedHealth Group's shares are down 0.5% over the past year but up more than 774% over the past 10 years. The company, which operates in every state and 33 countries, has two segments: Optum health services and UnitedHealthcare insurance.
Both groups are performing well, but Optum's revenue has seen more growth, up 17% in 2022 sales compared to 13% for UnitedHealthcare. Optum also had a better operating margin of 7.7%, compared to a 5.8% for UnitedHealthcare.
The company reported 2022 revenue of $324.2 billion, up 13%. For the quarter, revenue totaled $82.8 billion, up 12.3% year over year, marking its 10th consecutive quarter of revenue growth. UnitedHealth Group's full-year EPS came in at $21.18, up 18.3%, the 14th consecutive year of EPS growth.
This year, the company said it expects 2023 revenue of $357 million to $360 million, reflecting a rise of 10.1% to 11%, and annual EPS of $23.15 to $23.65, a boost of between 9.3% to 11.6%.
UnitedHealth Group switched to a quarterly dividend in 2010 and has raised its dividend every year since then. Last August, the company raised it by 13.7% to $1.65 per share. At its current price, the yield is around 1.06%. There's plenty of room for growth with an expected dividend payout ratio of just 28%, based on the lower end of the company's expected earnings this year.
