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Goldman Sachs (GS) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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
Based in New York, Goldman Sachs (GS - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 7.6%. The investment bank is paying out a dividend of $2.5 per share at the moment, with a dividend yield of 2.71% compared to the Financial - Investment Bank industry's yield of 0.47% and the S&P 500's yield of 1.57%.
Looking at dividend growth, the company's current annualized dividend of $10 is up 11.1% 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 29.39%. 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 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, GS expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $33.32 per share, with earnings expected to increase 10.84% 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. 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).