LLY is a preferred dividend growth stock; high growth rates and low payout ratio make it attractive despite a sub-1% yield.

Okay, finally, this now brings us to the fifth and final purchase on the list. For this, we're actually going to be heading towards the healthcare sector, but we've already talked a lot about technology on this list.

In fact, there is a lot of technology in this company as well. So, not a very big change , but let's move on to this company, another big dividend growth option , namely pharmaceutical giant Eli Lilly ( trading symbol LLY), of which BlackRock acquired another $1.3 billion in the last quarter, bringing their total stake to more than $80 billion.

Now, just like the others, this is another high-performing stock when it comes to a consistently record-breaking share price, unfortunately resulting in a dividend yield of less than 1% based on today's current share price.

But where Lily lacks revenue, it certainly makes up for it with tremendous growth in every other aspect. To begin with, both their dividend growth rate and growth history are in the double digits , and most importantly, their dividend payout ratio is very small, at only about 20%, which is vital and frankly rare for a pharmaceutical giant like this; Because this not only enables them to continue raising distributions at high rates, but also leaves them with huge cash flow that they can inject into things that are very important to pharmaceutical and biotechnology companies, such as clinical trials, factory expansions and strategic acquisitions, which is exactly what Lilly has been doing with near-perfect skill in recent years.

We will get to that in a little while, but let me show you the percentage calculator one last time . This time it's for Lilly. If you had bought the stock 10 years ago, it would have cost around $67 per share .

When you calculate the current dividend per share that you could have received for $67, you would find that you receive approximately $7 in dividends per share. This translates to a return of over 10%.

Can you imagine owning Eli Lilly shares today? It's one of the biggest growth monsters in the pharmaceutical sector , isn't it? Every investor in the pharmaceutical sector wants to own Lilly shares because of the tremendous growth it is achieving.

Can you imagine that it also pays dividends of more than 10%?

Typically, to get that, you have to turn to a struggling company like Pfizer, something whose price has dropped from its peak pandemic levels, you know. A stock that has suffered damage of this type, where the stock price has collapsed significantly.

Typically, to get a high dividend yield in the pharmaceutical sector , you need this type of stock. You certainly wouldn't have expected to see that from a company like Eli Lilly.

But again, this is the power of investing in dividend growth . You just need to get in early and invest for the long term. You know, many people shouldn't get into a rage. But many people criticize long-term investing and say, "Oh , it's all about short-term trading."

They underestimate the importance of long-term investment. This is the power of long-term investment. Can you imagine that Eli Lilly's stock performance was so strong? It is literally the largest pharmaceutical giant right now in terms of market capitalization because the share price has risen so dramatically.

However, you can also get a huge dividend yield from it as well. But again, you need to be a long-term investor to make that happen . It should be. It's the only way.

Well, that being said , Eli Lilly executes those strategies you'd typically expect from pharmaceutical giants almost perfectly. Their popular injections, Zipbound and Mongaroo for weight loss and diabetes, have become a huge source of income for them, generating billions of dollars in sales with growth of 46% and 91% respectively in the last quarter alone.

Together, they helped Lilly capture more than 60% of this entire market. They are also expanding with new releases that are showing very strong results. They have made several new acquisitions, some of which are supported by artificial intelligence technologies in their operations.

They have announced partnerships in the field of artificial intelligence, and have even completed the construction of their new supercomputer, " LilyPod," which is now considered the most powerful biotechnology supercomputer in the world.

It is powered by more than a thousand next-generation " Blackwell" graphics processing units from Nvidia. This will greatly enhance their development pipeline, their drug discovery platform, and all that sort of thing.

So there is a lot to look forward to in the future as well. Because of all this, analysts expect tremendous growth to continue for them in terms of revenues and profits, and they are already leaders in the industry due to their huge size.

I mean, if you want to talk about growth, Lilly meets all the criteria and fits perfectly with what a distribution growth investor is looking for in this category. Even the stock's valuation benefits from all this growth, because it has pushed the price-to-earnings-to- growth (PEG) ratio to levels even lower than the sector, if you can believe it.

That is, the most desirable stock in the biotechnology and pharmaceuticals sector is actually undervalued by the sector due to the massive growth that is accounted for in the (PEG) ratio.

Now, I like Lily a lot and would give it preference over KLA, but I can't rank it on the same level as companies like Nvidia, Microsoft, or Broadcom, which I trust a little more and which are in my portfolio.