Are You Looking for a High-Growth Dividend Stock?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Goldman Sachs in Focus
Headquartered in New York, Goldman Sachs (GS) is a Finance stock that has seen a price change of 29.1% so far this year. The investment bank is currently shelling out a dividend of $3 per share, with a dividend yield of 2.41%. This compares to the Financial - Investment Bank industry's yield of 0.75% and the S&P 500's yield of 1.55%.
Looking at dividend growth, the company's current annualized dividend of $12 is up 14.3% 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 24.42%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Goldman's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for GS for this fiscal year. The Zacks Consensus Estimate for 2024 is $35.43 per share, representing a year-over-year earnings growth rate of 54.92%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 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).
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