The Goldman Sachs Group, Inc. (NYSE:GS) has announced that it will pay a dividend of $3.00 per share on the 28th of March. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Goldman Sachs Group

Goldman Sachs Group's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Goldman Sachs Group was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 41.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Goldman Sachs Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $2.20 total annually to $12.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Goldman Sachs Group has grown earnings per share at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Goldman Sachs Group's prospects of growing its dividend payments in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Goldman Sachs Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Goldman Sachs Group that investors should take into consideration. Is Goldman Sachs Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.