All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 -9.19%. The investment bank is currently shelling out a dividend of $3 per share, with a dividend yield of 2.31%. This compares to the Financial - Investment Bank industry's yield of 1.21% and the S&P 500's yield of 1.69%.
Taking a look at the company's dividend growth, its current annualized dividend of $12 is up 4.3% from last year. In the past five-year period, Goldman Sachs has increased its dividend 4 times on a year-over-year basis for an average annual increase of 23.60%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Goldman's current payout ratio is 28%, meaning it paid out 28% 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 $45.46 per share, with earnings expected to increase 12.14% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, GS is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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This article originally published on Zacks Investment Research (zacks.com).
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