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In the wake of Meta (META) initiating a dividend of $0.50 per share, Goldman Sachs is lifting its dividend per shares growth forecast for the broader market.
Strategist David Kostin is lifting hits S&P 500 (SP500) (NYSEARCA:SPY) (IVV) (VOO) DPS growth forecast to 6% from 4%, keeping 2025 at 5%.
“From a top-down perspective, the improvement in S&P 500 EPS growth in 2H 2023 and our forecast for 5% EPS growth in both 2024 and 2025 will support DPS growth,” Kostin said. “From a bottom-up perspective, META’s dividend initiation announcement will increase S&P 500 2024 DPS by just under 1% and large US Banks will likely deliver 10% DPS growth in 2024.”
“The dividend futures market implies 3% S&P 500 DPS growth in 2024, a 4 pp increase from -1% since the end of October.”
“If other large firms were to initiate dividends, it would have a meaningful impact on aggregate,” Kostin added. “GOOGL and AMZN are the two largest stocks that currently do not pay a dividend but that have fundamentals that historically implied higher odds of initiating a dividend relative to peers.”
“If GOOGL and AMZN initiated dividends at a 10% payout ratio, it could lift 2024 S&P 500 DPS by up to $1.32 (1.8%).”
“In contrast with 2023, when banks sought to preserve capital, in 2024 our Banks (KBE) analysts believe that a combination of an improving economic outlook and potentially scaled back Basel 3 Endgame provisions will lead to excess capital positions for large US banks,” Kostin said. “They believe this will lead to an increase in Bank buyback activity and our analysts also model an 10% increase in dividends for the GSIBs on average in 2024.”
Goldman screened for the largest non-dividend-paying S&P 500 stocks, each with a hypothetical payout of 10%, calculating the increase it would have on the S&P dividend per share for 2024.
- Alphabet (GOOG) (GOOG), hypothetical DPS $0.70, implied increase in 2024 S&P DPS $0.88 1.2%
- Amazon.com (AMZN) $0.40, $0.44 0.6%
- Berkshire Hathaway (BRK.B) $1.80, $0.38 0.5%
- Tesla (TSLA) $0.30, $0.10 0.1%
- Salesforce (CRM) $1.00, $0.11 0.1%
- Adobe (OTC:ABCE) $1.80, $0.10 0.1%
- Advanced Micro Devices (AMD), $0.40, $0.07 0.1%
- Netflix (NFLX), $1.70, $0.09 0.1%
- ServiceNow (NOW), $1.30, $0.03 0.0%
- Uber (UBER), $0.10, $0.03 0.0%
- Intuitive Surgical (ISRG), $0.60, $0.03 0.0%
- Booking Holdings (BKNG), $17.70, $0.07 0.1%
- Boeing (BA), $0.40, $0.03 0.0%
- Palo Alto Networks (PANW), $.60, $0.02 0.0%
- Vertex Pharmaceuticals (VRTX), $1.70, $0.05 0.1%
- Regeneron Pharmaceuticals (REGN), $4.6, $0.06 0.1%
- Boston Scientific (BSX), $0.20, $0.04 0.1%
- Synopsys (SNPS), $1.40, $0.02 0.0%
- Fiserv (FI), $0.90, $0.06 0.1%