Goldman’s 2019 Capital Return Plan Is Good, But Investors Received More From The Bank In 2017

Goldman Sachs (NYSE:GS) has successfully cleared this year’s Fed stress test and has announced plans to return $8.8 billion to its shareholders over the next twelve months. Trefis has analyzed the trends in Goldman Sachs’s dividend payouts and share repurchases over the last 5 years and has summarized expectations for the next three. You can modify Trefis forecasts to see the impact any changes would have on the Goldman’s share repurchase and dividends using our Interactive Dashboard, and also see more Trefis data for financial services companies here.

Capital Return Plan (2019)

• Under the new plan, Goldman will hike its quarterly dividends by 47% – from 0.85 cents now to 1.25 cents a share beginning Q3 2019. This works out to total dividends of $1.8 billion assuming average outstanding shares of 360 million over the next 12 months.
• The bank also plans to repurchase $7 billion worth of its common shares over this period.
• The latest capital return plan of $8.8 billion over Q3 2019-Q2 2020 represents a 40% jump compared to the $6.3 billion in dividends and share repurchases Goldman Sachs announced in 2018, but falls short of the total payout for 2017

The chart below details Goldman’s total shareholder payouts for each year since 2013, and includes our forecast for the next three years.

 Historical Payouts

• Over the last ten years, Goldman has returned $57.3 billion in cash to common shareholders for an average of $5.7 billion a year – representing about 79% of its average retained earnings of $71.7 billion for this period.
• The total dividend payout has been roughly $10.5 billion, while share buybacks have cost the bank $46.8 billion over the same period. This clearly establishes Goldman’s preference for share repurchases over dividend payouts.
• Goldman has steadily raised its quarterly dividend since 2012 – up from 32 cents a share to 0.85 cents a share in Q2 2019.
• The same trend is expected to continue over Q3 2019-Q2 2020, as it has announced a 47% increase in quarterly dividend to $1.25 per share.

What To Expect In 2019

• We expect total dividends for the year to be around $1.5 billion, as the annual dividend per share will increase to $4.30 from $3.14 in 2018. Also, the bank has repurchased $1.25 billion in shares in Q1 2019 and is expected to repurchase the same amount in second quarter for a total of $2.5 billion over the first half.
• Taken together with $3.5 billion in likely purchases for the rest of the year (half of the total proposed repurchases of $7 billion), total share repurchases is expected to be around $6 billion in 2019.
• The total payout for the year is, therefore, likely to be around $7.5 billion – which is 84% of our forecast for the bank’s net income of $9 billion.
• This would mean a 67% increase in total shareholder payout as compared to previous year, but remains below the record payout amount of $7.9 billion for full-year 2017.
• We expect shareholder payout to average around 80% of net income over the next three years.

We factor in these payouts in our analysis of Goldman Sachs in the form of an adjusted dividend payout rate (which is the total payout ratio), shown in the chart below.

Do not agree with our forecast? Create your own forecast for Goldman Sachs by changing the base inputs (blue dots) on our interactive dashboard.

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