On September 29, The Goldman Sachs Group, Inc. (NYSE:GS) will raise its dividend from the same time last year to $2.50. This puts the dividend yield at about 2.8%, which is about the same as the average for the industry.
Goldman Sachs Group, Inc. (NYSE:GS)‘s earnings are more than enough to cover the dividends.
If the dividend payments can’t be kept up, the dividend yield doesn’t mean much. Based on the last payment, Goldman Sachs Group, Inc. (NYSE:GS) was making enough to cover the dividend, but its free cash flows were negative. In general, we think cash flow is more important than earnings, so we wouldn’t count on this dividend being paid out for a long time.
Over the next year, it is expected that earnings per share will drop by 10.2%. If the dividend keeps going in the same direction as it has been, we think the payout ratio could be 23%, which is a number we’re comfortable with and think is possible based on earnings.
Goldman Sachs Group, Inc. (NYSE:GS) has done Well in the past.
The company has been paying dividends for a long time, and they have been pretty stable, which makes us feel good about the potential for future dividends. Since 2012, the annual payment was $1.40, but the most recent full-year payment was for a total of $10. This means that the company has been giving out more money at a rate of 22% per year over that time. So, dividends have been growing pretty quickly, and what’s even better is that they haven’t had any big drops during this time.
It looks like the dividend will go up.
Investors who bought shares of the company over the past few years will be happy with the dividends they have received. Over the past five years, Goldman Sachs Group, Inc. (NYSE:GS)‘s earnings per share (EPS) have grown at a rate of 20% per year. The low payout ratio reported by the company and the fact that EPS is going up are both good signs for the dividend.
In conclusion, it’s always good to see the dividend go up, but we don’t think Goldman Sachs Group, Inc. (NYSE:GS)‘s payments are rock solid. With not enough cash coming in, it is hard to see how the company can pay dividends. If you want to make money, we don’t think Goldman Sachs Group, Inc. (NYSE:GS) is a good stock to add to your portfolio.
The way the market moves shows how much more valuable a consistent dividend policy is than one that changes a lot. Even though dividend payments are important, they are not the only thing our readers should know about a company when judging it.
Featured Image : Megapixl © Alexeynovikov
