Does Eli Lilly & Co. (LLY)’s Dividend Have Room to Soar?

Future growth
Up to this point, we’ve looked at Eli Lilly & Co. (NYSE:LLY)’s dividend in the past, and we’ve also seen how its stock is being perceived by the market today. However, the most important factor to consider when understanding a dividend’s future is where the company’s cash flow is heading. It’s hard to generate more cash without growing sales, so let’s take a look at what industry analysts are expecting for Eli Lilly’s revenue growth relative to peers this year.

Foolish bottom line
Like many of its peers, Eli Lilly & Co. (NYSE:LLY) has faced, and continues to face, significant patent cliff headwinds. Cymbalta and Humalog accounted for one-third of 2012 sales, and both drugs lose patent protection this year. That presents a big challenge to cash flow and payout ratio. The company seems to like its $1.96 annual payout (it’s been at that level for four years and counting), and while I don’t think it’ at risk of dropping, I also think these challenges decrease the chances that it will grow in the near term.