Goldman Sachs Group's (NYSE:GS) Shareholders Will Receive A Bigger Dividend Than Last Year

The Goldman Sachs Group, Inc. (NYSE:GS) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of September to $3.00. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

View our latest analysis for Goldman Sachs Group

Goldman Sachs Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Goldman Sachs Group's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 27.3%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Goldman Sachs Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $2.00, compared to the most recent full-year payment of $12.00. This means that it has been growing its distributions at 20% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Goldman Sachs Group Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Goldman Sachs Group has been growing its earnings per share at 5.2% a year over the past five years. Goldman Sachs Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Goldman Sachs Group will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Goldman Sachs Group is a great stock to add to your portfolio if income is your focus.

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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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