Eli Lilly (LLY) looks interesting here as it has a potential blockbuster Alzheimer’s drug, pays a high dividend and has a very low valuation. It is akin to buying an utility with a high yield with a lottery ticket attached.
Eli Lilly – “Eli Lilly and Company develops, manufactures, and sells pharmaceutical products worldwide. It offers neuroscience products to treat schizophrenia, manic episodes, and bipolar maintenance; depression and diabetic peripheral neuropathic pain; attention-deficit hyperactivity disorder in children, adolescents, and adults; bulimia nervosa and obsessive-compulsive disorders; and bipolar depression and treatment-resistant depression”. (Business description from Yahoo Finance)
7 reasons LLY is a good, safe dividend play at $39:
- Lilly has an AA- rated balance sheet, a low beta (.71) and provides a 5.2% dividend yield.
- It is selling at the bottom of its five-year valuation range based on P/E, PB, P/S, and P/CF.
- If Lilly is successful with it Alzheimer’s drugs it could add 50% to 100% to its stock price according to an analyst at Sanford Bernstein. A very nice upside to a stock that already pays a 5% dividend.
- LLY is dirt cheap from a cash flow perspective as it sells for less than 6 times trailing 12 month operating cash flow.
- Insiders are holding tight as there has been only a trickle of insider selling over the past six months.
- Lilly is selling at just over 9 times trailing earnings, which is a 40% discount to its five-year average.
- Eli Lilly is at a 52-week high and looks poised to break out of a narrow range. Even Jim Cramer endorsed this high-yielding pharma stock the other day.