Dividend growth investing builds long-term wealth for retirement by focusing on companies that consistently increase payouts. These stocks provide rising income and often deliver superior total returns through compounding.
Research from Hartford Funds, using Ned Davis Research data from 1973 to 2025, shows companies that grew or initiated dividends in the S&P 500 achieved higher average annual returns with lower volatility than non-payers or cutters. Over long periods, dividend growers and initiators outperformed the equal-weighted S&P 500 and demonstrated resilience in market declines.
Many established dividend growth stocks exist, but Eli Lilly (NYSE: LLY) stands out as a surprising yet strong choice today due to its robust growth and consistent increases.
Why Eli Lilly Dominates Pharma
Eli Lilly ranks among the world’s largest pharmaceutical companies by revenue and holds the highest market capitalization in the sector, hitting $1 trillion in November.
The company derives most revenue from its incretin portfolio, primarily Mounjaro (tirzepatide for type 2 diabetes) and Zepbound (tirzepatide for obesity). In the third quarter, combined sales drove 54% year-over-year revenue growth to $17.60 billion. Analysts project tirzepatide as the top-selling drug by 2030.
Tirzepatide acts as a dual agonist for GLP-1 and GIP receptors, outperforming single GLP-1 agonists like semaglutide, which is used in Novo Nordisk‘s (NYSE:NVO) Ozempic and Wegovy. Head-to-head trials showed tirzepatide achieved around 20% weight loss compared to losses of 14% for semaglutide, with greater reductions in waist circumference and higher rates of 20% to 25% loss.
GLP-1 Leadership and Future Growth
Eli Lilly leads the booming GLP-1 market for diabetes and obesity, with Mounjaro and Zepbound capturing significant U.S. prescriptions and sales, outpacing Novo Nordisk’s offerings despite competition.
The market offers massive opportunity, driven by the prevalence of obesity and expanding indications to other conditions, such as cardiovascular risk and sleep apnea.
Novo Nordisk scored a major coup and gained first-mover advantage last week when the Food & Drug Administration approved its once-daily oral Wegovy pill for weight loss. Eli Lilly is also pursuing a once-daily dose with orforglipron, its oral small-molecule GLP-1 agonist. The company submitted a new drug application for it earlier this month, setting it up for potential approval in early 2026. Phase 3 data showed orforglipron maintaining weight loss after switching from injectables, with positive efficacy in diabetes and obesity trials.
Tirzepatide’s superior efficacy in injections positions Eli Lilly to compete effectively, supported by manufacturing expansions for increased supply to prevent shortages like those that occurred early on with Wegovy. If approved soon, orforglipron could thwart Novo Nordisk’s first-mover advantage. Weight-loss pills vastly expand the market, as many potential users shy away from getting injections.
A Reliable Dividend Growth Profile
Eli Lilly just declared its first-quarter dividend of $1.73 per share, a 15% increase from prior levels. It has paid dividends consistently for 55 consecutive years and raised them for the last 11 years. Notably, Lilly has hiked its dividend at a 12% compound annual growth rate (CAGR) over the past decade, but in the past five years has accelerated the increases to 16% annually, making its recent hike in line with the trend. With a payout ratio of 44%, the dividend is safe and offers room for future increases.
The current yield is around 0.6%, down from 1.8% five years ago due to strong stock appreciation. However, yield on cost — the annual dividend divided by original purchase price — rose to 4.1% in that timespan, and over ten years, yield on cost stands at 8.2%.
Yield on cost is a more important consideration than simply looking at yield, as it measures effective income return based on the initial investment. It grows with every dividend hike even as the stock price increases.
Key Takeaway
Eli Lilly’s leadership in pharmaceuticals, driven by dominance in the GLP-1 market with Mounjaro and Zepbound, plus a promising pipeline including oral orforglipron and next-generation candidates, fuels the company’s strong growth. Combined with a solid record of dividend increases to reward shareholders, Eli Lilly is an excellent dividend growth stock to add to your portfolio for 2026 and beyond.
Top Gaining Stocks
Top Losing Stocks