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Investors who want to cash in on The Goldman Sachs Group, Inc.’s (NYSE:GS) upcoming dividend of US$0.80 per share have only 4 days left to buy the shares before its ex-dividend date, 27 February 2019, in time for dividends payable on the 28 March 2019. Should you diversify into Goldman Sachs Group and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Goldman Sachs Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 12%, which means that the dividend is covered by earnings. Going forward, analysts expect GS’s payout to increase to 14% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.8%. However, EPS is forecasted to fall to $24.52 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of GS it has increased its DPS from $1.4 to $3.2 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes GS a true dividend rockstar.
Compared to its peers, Goldman Sachs Group produces a yield of 1.6%, which is on the low-side for Capital Markets stocks.
Keeping in mind the dividend characteristics above, Goldman Sachs Group is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for GS’s future growth? Take a look at our free research report of analyst consensus for GS’s outlook.
- Valuation: What is GS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.