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The Goldman Sachs Group, Inc. (NYSE:GS)'s Could Be A Buy For Its Upcoming Dividend

Simply Wall St

The Goldman Sachs Group, Inc. (NYSE:GS) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 28th of February, you won't be eligible to receive this dividend, when it is paid on the 30th of March.

Goldman Sachs Group's next dividend payment will be US$1.25 per share, and in the last 12 months, the company paid a total of US$5.00 per share. Last year's total dividend payments show that Goldman Sachs Group has a trailing yield of 2.2% on the current share price of $230.62. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Goldman Sachs Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Goldman Sachs Group is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NYSE:GS Historical Dividend Yield, February 23rd 2020

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Goldman Sachs Group, with earnings per share up 3.9% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Goldman Sachs Group has delivered an average of 14% per year annual increase in its dividend, based on the past ten years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Goldman Sachs Group an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Goldman Sachs Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Wondering what the future holds for Goldman Sachs Group? See what the 20 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.