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Goldman Sachs (GS) Could Be a Great Choice

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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

Goldman Sachs (GS - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 16.71% since the start of the year. Currently paying a dividend of $2.75 per share, the company has a dividend yield of 2.44%. In comparison, the Financial - Investment Bank industry's yield is 0.67%, while the S&P 500's yield is 1.58%.

Taking a look at the company's dividend growth, its current annualized dividend of $11 is up 4.8% 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 26.83%. 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 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.

GS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $36.57 per share, representing a year-over-year earnings growth rate of 59.90%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, GS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).


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