2 Outstanding Dividend Stocks to Buy and Hold for a Decade

Several investing trends are sweeping through Wall Street right now, including artificial intelligence (AI), robotaxis, and others. Investors shouldn't miss the opportunity to capitalize on these fast-growing markets, but it's also important not to forget tried-and-true methods for earning above-average long-term returns. One of them is to invest in excellent dividend-paying companies. Let's consider two that are worth a second look right now: Eli Lilly (NYSE:LLY) and Merck (NYSE:MRK).

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1. Eli Lilly

Eli Lilly has perhaps been one of the best growth stocks in the pharmaceutical industry over the past five years. The company's financial results have been excellent, thanks to its diabetes and weight loss products, Mounjaro and Zepbound, respectively. In the second quarter, Eli Lilly's revenue increased by 48% year over year to $23 billion, while its adjusted earnings per share climbed 33% year over year to $8.38. Mounjaro and Zepbound both performed well during the period and could maintain momentum over the medium term.

In August, Mounjaro earned approval in the U.S. to reduce the risk of major cardiovascular events in adults with type 2 diabetes who are at high cardiovascular risk. The medicine is being tested across several additional indications. It could earn additional label expansions, in addition to riding the wave of the rapidly growing market for GLP-1 medicines (Mounjaro and Zepbound mimic the actions of the GLP-1 and GIP hormones).

Further, Eli Lilly has other attractive pipeline candidates that will help it strengthen its lead in this space even as competition intensifies. Eli Lilly's next-gen medicines, including retatrutide and eloralintide, could both help the company expand the market. Retatrutide posted outstanding Phase 3 results and could attract patients who haven't achieved sufficient weight loss with existing approved medicines.

And eloralintide posted promising Phase 2 clinical trial results while showing highly encouraging tolerability, so it might eventually appeal to patients who may be avoiding weight-loss medicines due to their side effects. Of course, eloralintide still has to pass pivotal studies (it is undergoing Phase 3 trials) before earning approval. But the point is that Eli Lilly's pipeline in its core therapeutic area is attractive.

The company has promising products and pipeline candidates in other areas as well, as it seeks to diversify its portfolio. That makes for a healthy business that could maintain consistent revenue and earnings growth over time, helping the company sustain its dividend program. Eli Lilly's forward yield of 0.6% isn't impressive, but that's because its shares have outperformed the broader market in recent years.

Meanwhile, it has also increased its dividend at a good pace -- it has more than doubled over the past five years. So, Eli Lilly isn't just an excellent growth stock. It is a great dividend stock, too, and given its dominance in its core market and deep pipeline, it could deliver excellent returns through 2036.

2. Merck

Merck's biggest growth driver, Keytruda, a cancer medicine, will lose its patent exclusivity in the U.S. in 2028. Keytruda is currently one of the world's best-selling brands, and even with it, Merck's revenue isn't growing that fast. In the second quarter, the company's sales came in at $16.6 billion, up 5% year over year. However, Merck's prospects are much stronger than it seems at first.

The company has earned approval for several products in recent years that should help replace Keytruda. Perhaps the most important among them is Keytruda Qlex, a subcutaneous version of the medicine. The original formulation is administered via intravenous infusion, but that takes as much as half an hour. The subcutaneous version takes a couple of minutes.

This more convenient dosing is advantageous to patients and physicians and could help Keytruda Qlex retain many of the original formulation's patients beyond the 2028 patent cliff. Several other newer medicines, such as Winrevair for pulmonary arterial hypertension and Capvaxive, a pneumonia vaccine, could contribute for a while as well. And Merck has a deep pipeline with several products with blockbuster potential.

So, Merck's prospects remain intact, and the company's dividend program looks strong. Merck has increased its payouts by almost 90% over the past decade, and it currently offers a forward yield of 2.3%. Merck is an attractive dividend stock to hold onto for the next 10 years.

Prosper Junior Bakiny has positions in Eli Lilly. The Motley Fool has positions in and recommends Eli Lilly and Merck. The Motley Fool has a disclosure policy.