For all of its many successes, the healthcare industry isn't exactly a hotbed of dividend-paying stocks. However, this doesn't mean the sector is entirely without companies that remunerate their shareholders. Some of its larger and more established companies not only hand out distributions on a regular basis, they also declared hefty dividend raises heading into 2024.
So take a bow, Eli Lilly (LLY 1.65%) and UnitedHealth Group (UNH 0.84%); both of these familiar sector names hiked their payouts at double-digit rates. Here's a brief rundown of both increases.
1. Eli Lilly
One of the most storied names in the U.S. pharmaceutical business, Eli Lilly started 2024 with gusto. It's got excellent momentum behind obesity treatment Zepbound, which was approved by the Food and Drug Administration (FDA) last November (it was green-lit for diabetes in 2022 under the brand name Mounjaro).
As we've seen with the white-hot Wegovy from Denmark's Novo Nordisk, Zepbound will be sold to a vast market in America where demand for weight-loss solutions is high. Given its size and prominence, Eli Lilly is guaranteed to be a strong competitor in this segment.
But that's only one solid product in a portfolio full of them. Zepbound will join drugs like breast cancer treatment Verzenio and diabetes medication Trulicity, both hugely popular medicines that have sold briskly (and are extremely likely to continue doing so).
Eli Lilly's business is going gangbusters, which is why investors have flocked to its stock. Thanks to that, it is now the world's most highly capitalized pharmaceutical company, worth a staggering $593 billion-plus.
It also operates a business that throws off plenty of cash; its latest annual free cash flow figure topped $5 billion, more than enough to take care of the $3.5 billion or so it paid out in dividends. That situation shouldn't change with the 15% dividend raise the company declared back in December, pushing the quarterly distribution to $1.30 per share.
There's still time to take advantage of Eli Lilly's latest dividend raise, although the bad news is that -- partially as a consequence of the stock's long-tail rally -- it doesn't yield much. It'll be paid on March 8 to investors of record as of Feb. 15, and at the current stock price the yield would be 0.8%.
NYSE: LLY
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2. UnitedHealth Group
Elsewhere in the healthcare industry, we have another monster of a company -- big insurer UnitedHealth. Like Eli Lilly, it tips the scales in terms of market cap, with a figure just under $500 billion. Also similar to its pharmaceutical cousin, it enacted a double-digit percentage dividend raise in 2023, in this case a 14% lift to $1.88 per share.
According to American Medical Association research, the company was the No. 1 nationwide health insurer in the U.S. in 2022, with a market share of 14%.
Meanwhile, senior citizens are becoming an increasingly larger share of the U.S. population. Older folks generally need more healthcare, and this plays very well into the hands of big providers such as UnitedHealth. The company has also been very acquisitive for many years, and the combination of these two dynamics has made for some impressive development in certain line items.
Chiefly we're talking about annual revenue, which ballooned by nearly $100 billion in the relatively short space between 2018 and 2022 (landing at more than $324 billion in the latter year). Profitability isn't all that high, but I'm only thinking relative to the top line. For example, in 2022 UnitedHealth's headline net income was over $20 billion, representing solid (16%) growth over 2021.
Ditto for free cash flow; this rose at an 18% year-over-year pace in 2022 to over $23 billion. That was more than sufficient to cover the sub-$6 billion dividend payout and $7 billion in share repurchases, and provide enough left over to support the company's business in myriad ways.
Unfortunately, investors can't get the jump on this dividend raise they way they can with Eli Lilly's. UnitedHealth's 14% hike took effect with the company's distribution in June 2023. At the moment, that $1.88 per share yields 1.4%.
