Goldman Sachs (GS) Could Be a Great Choice

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.

Based in New York, Goldman Sachs (GS) is in the Finance sector, and so far this year, shares have seen a price change of -1.97%. The investment bank is paying out a dividend of $4.00 per share at the moment, with a dividend yield of 2.09% compared to the Financial - Investment Bank industry's yield of 0.84% and the S&P 500's yield of 1.35%.

Looking at dividend growth, the company's current annualized dividend of $18.00 is up 28.6% 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 22.04%. 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 31%, meaning it paid out 31% of its trailing 12-month EPS as dividend.

GS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $56.61 per share, which represents a year-over-year growth rate of 10.31%.

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 its 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 #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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