2 Dividend-Growth Stocks That Billionaire Izzy Englander Loves

Investing in dividend stocks is a great strategy for many reasons, including the potential they offer you to significantly boost your long-term returns by automatically reinvesting their payouts. Furthermore, the pursuit of dividends need not come at the expense of other investment styles. Some income stocks look like excellent growth stocks, too.

Here are two examples: Microsoft (NASDAQ: MSFT) and Eli Lilly (NYSE: LLY). These two market leaders are popular on Wall Street. Take Israel "Izzy" Englander, the founder and CEO of Millennium Management. Both Microsoft and Eli Lilly feature in Millennium Management's top 10 holdings, with the former accounting for 1.71% of the portfolio as of Q3 and the latter making up 0.76%. In the third quarter, Englander and his team increased their stakes in Microsoft and Eli Lilly by 51% and 86%, respectively.

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Here is why investors should seriously consider following Englander's lead and purchasing shares of these two top corporations.

1. Microsoft

While Microsoft's work in cloud computing tends to grab much of the attention, the company has a solid dividend track record. In the past decade, Microsoft currently boasts an annual dividend per share of $3.32 and has increased its payouts by an impressive 168%. Although its forward dividend yield is 0.74% -- compared to the S&P 500's average of 1.32% --its payout ratio is just under 25%, a conservative figure that gives it plenty of room to grow its dividend further.

That's not surprising, considering that the company has been growing its free cash flow at a good clip. And regarding its low yield, for a company whose share price has performed as well as Microsoft's, it's not a cause for concern.

MSFT Free Cash Flow data by YCharts

Microsoft can keep up this pace thanks to those aspects of its business for which it is well known. The tech giant remains the leader in the market for computer operating systems although those products are no longer the company's main growth driver. The company's involvement in AI, though, is having an impact. Microsoft offers various AI-related services through its Azure division.

In its fiscal 2025 first quarter, which ended on Sept. 30, Microsoft's revenue increased by 16% year over year to $65.6 billion, while its Azure revenue grew by 33%.

Like many other tech companies, Microsoft has been gushing about the impact of AI on its business and how fast it is growing. Management said its AI unit is on track to surpass an annual revenue run rate of $10 billion next quarter, a milestone it will reach much faster than any other business segment in the long and impressive history of one of the most successful companies in the world. So its revenue and earnings growth should remain pretty strong in the medium term.

Microsoft's massive cash stockpile -- its trailing 12-month free cash flow is nearly $73 billion -- and its ability to find lucrative opportunities should allow it to perform well beyond that. It should also help fund its dividend, which stands at $3.32 per share, providing a yield of 0.76%.

That's before we mention the company's moat, which is derived from its strong brand name and the switching costs in its cloud computing segment. In short, Microsoft is a tremendous dividend-growth stock -- but also a great growth stock -- for long-term investors.

2. Eli Lilly

Eli Lilly's incredible performance in the past few years has turned it into the largest healthcare company by market capitalization in the U.S. The pharmaceutical giant famously made important progress in the weight loss treatment space, where its GLP-1 inhibitor, Zepbound, is already racking up sales of more than $1 billion per quarter, even though it was only approved by the Food and Drug Administration in November 2023.

Zepbound and the diabetes treatment Mounjaro (which are the same underlying drug), as well as other products, such as its recently approved Alzheimer's disease treatment, Kisunla, should help drive strong sales growth for a while. In the third quarter, Eli Lilly's revenue increased by 20% year over year to $11.4 billion.

Further, the drugmaker has plenty of pipeline candidates that could bolster its lineup. These include an investigational weekly insulin product that recently produced positive results in a phase 3 study. Eli Lilly also has next-generation weight loss candidates such as retatrutide in clinical trials, while phase 2 candidates like muvalaplin, a potential therapy to help lower lipoprotein(a), also look promising.

Among the pharma giant's exciting programs in earlier stages is an investigational gene therapy for deafness, for which it reported some encouraging results at the beginning of the year.

Eli Lilly's greatest strength today isn't Zepbound, nor any one of its other fast-growing products. It is the company's ability to regularly develop newer and better medicines -- something it has been doing for decades, especially (though not exclusively) in the field of diabetes. That's why Eli Lilly's shares look attractive. The dividend makes them even more so. The company has increased its payouts by 200% over the course of the past 10 years, its forward yield tops 0.77%, and its dividend per share stands at $6.

While Eli Lilly's payout ratio looks high at 78%, that's largely attributable to the company's decision to invest heavily in its future through acquisitions and expansions of its manufacturing capacity. The company just announced it will spend another $3 billion to expand a manufacturing facility it recently acquired. Since 2020, the pharmaceutical giant has poured $23 billion into similar projects, which, it hopes, will help it avoid issues like its recent inability to meet the demand for Zepbound.

In my view, Eli Lilly's relatively high payout ratio is no cause for concern. The company is clearly committed to increasing its payouts while it continues to grow its revenue and earnings rapidly. Eli Lilly is another excellent way for investors to combine growth and income.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.