Eli Lilly and Company (NYSE:LLY) has carved out a strong position in the pharmaceutical industry, with much of its competitive advantage now tied to its leadership in diabetes and obesity treatments. The company’s moat comes from several factors working together: drug innovation, patent protection, manufacturing capacity, brand strength, and a deep pipeline of new treatments.
Mounjaro and Zepbound are the clearest examples. In 2025, the two drugs generated $36.5 billion in combined revenue, or 56% of Lilly’s total revenue. Mounjaro revenue climbed 99% year over year, while Zepbound revenue jumped 175%. The momentum has carried into 2026. In the second quarter, Mounjaro revenue rose 91% to $9.9 billion, while Zepbound revenue increased 46% to $4.9 billion.
Patent protection gives Lilly another important advantage. Mounjaro and Zepbound have U.S. compound patent protection through 2036, with protection extending to 2037 in major European countries and 2040 in Japan. That makes Lilly’s moat about more than having two blockbuster drugs. The company has time to expand its markets, increase production, and develop the next generation of treatments before those products eventually face broader competition. Lilly may be one of healthcare’s biggest stories, but other stocks are drawing serious hedge-fund interest too. Here are 10 healthcare stocks investors may want to watch.
Lilly’s Dividend Is More of a Bonus
Eli Lilly and Company is not a traditional income stock, and its dividend yield reflects that. The company’s forward annual dividend at $6.92 per share, giving the stock a 0.61% forward dividend yield. The trailing dividend yield is 0.56%, compared with a five-year average of 0.84%. The payout ratio stands at just 21.69%.
That low payout ratio tells an important part of the story. Lilly is keeping most of its earnings within the business, where they can be used for research, manufacturing expansion, and future growth. For investors focused on income, the dividend may not be enough to make Lilly particularly attractive. For growth-oriented investors, though, the picture is different. A relatively small dividend can still become more meaningful if earnings and the payout continue to grow over time. Lilly’s low dividend yield raises an interesting question: are there better income opportunities elsewhere in healthcare? This dividend comparison takes a closer look.
Lilly’s Forward P/E Looks More Reasonable
The bigger question is whether Eli Lilly and Company’s stock price already reflects too much of its expected growth. The stock is trading at 38.64 times trailing earnings and 24.39 times forward earnings. That is a sizeable difference. At 38.64 times trailing earnings, investors are paying nearly $39 for every dollar Lilly earned over the past year. Based on expected earnings, that falls to 24.39 times.
The difference can also be viewed through earnings yield. Lilly’s trailing earnings yield is roughly 2.6%, while its forward earnings yield is about 4.1%. The wider forward earnings yield reflects the earnings growth analysts are expecting. More importantly, the forward P/E has come down from several levels seen over the past year. Yahoo Finance shows forward P/E ratios of 33.00 in June 2026, 26.95 in March, 32.79 in December 2025, 25.32 in September 2025, and 35.71 in June 2025.
At 24.39 times forward earnings, Lilly is now below all of those quarterly readings. That does not mean the stock is cheap. A forward P/E of roughly 24 times still represents a premium valuation, especially for a company that will eventually face tougher comparisons as its GLP-1 business becomes larger and growth rates normalize. Still, the valuation looks much less demanding than it did when Lilly was trading above 30 times forward earnings.
The Bottom Line
Lilly has a strong pharmaceutical moat, powerful growth drivers, and plenty of room to reinvest in the business. Mounjaro and Zepbound are generating enormous revenue today, while patent protection and the company’s pipeline give Lilly a chance to build on that success.
The dividend is less important to the investment case. At a 0.61% forward yield and a 21.69% payout ratio, it is better viewed as an added benefit than the main reason to own the stock. Valuation is the more interesting part of the story. At 24.39 times forward earnings versus 38.64 times trailing earnings, the market is still expecting substantial earnings growth from Lilly. But the forward multiple has also fallen meaningfully from several points over the past year.
For investors looking at Lilly today, the question is not whether the company has a strong moat. It does. The real question is whether its future earnings growth can justify paying roughly 24 times those expected earnings. At the current multiple, the risk-reward picture looks more balanced than it did when Lilly was trading at much higher forward valuations.
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This article is originally published at Insider Monkey.
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