Goldman Sachs Group (NYSE:GS) Will Pay A Larger Dividend Than Last Year At $2.50
The Goldman Sachs Group, Inc. (NYSE:GS) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of September to $2.50. The payment will take the dividend yield to 3.0%, which is in line with the average for the industry.
Check out our latest analysis for Goldman Sachs Group
Goldman Sachs Group's Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Goldman Sachs Group's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Over the next year, EPS is forecast to fall by 10.4%. If the dividend continues along recent trends, we estimate the payout ratio could be 26%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Goldman Sachs Group Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.40 in 2012, and the most recent fiscal year payment was $10.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Goldman Sachs Group has impressed us by growing EPS at 18% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Our Thoughts On Goldman Sachs Group's Dividend
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 Goldman Sachs Group is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. 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.
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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.
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