Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Goldman Sachs in Focus
Goldman Sachs (GS) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of -1.74% since the start of the year. Currently paying a dividend of $3 per share, the company has a dividend yield of 2.13%. In comparison, the Financial - Investment Bank industry's yield is 1.02%, while the S&P 500's yield is 1.58%.
Looking at dividend growth, the company's current annualized dividend of $12 is up 4.3% 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 24.53%. 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. Right now, Goldman's payout ratio is 30%, which means it paid out 30% 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 $46.13 per share, which represents a year-over-year growth rate of 13.79%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. 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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The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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