Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Based in New York, Goldman Sachs (GS) is in the Finance sector, and so far this year, shares have seen a price change of 30.15%. Currently paying a dividend of $4.00 per share, the company has a dividend yield of 2.15%. In comparison, the Financial - Investment Bank industry's yield is 1%, while the S&P 500's yield is 1.49%.
Looking at dividend growth, the company's current annualized dividend of $16.00 is up 39.1% from last year. Over the last 5 years, Goldman Sachs has increased its dividend 4 times on a year-over-year basis for an average annual increase of 22.04%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Goldman's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, GS expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $45.63 per share, with earnings expected to increase 12.56% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that GS is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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