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Meta (META) recently declared a dividend of $0.50 per share, prompting Goldman Sachs to assess the potential effect on dividend per shares (DPS) growth across the broader market.
Goldman Sachs Reacts to Meta’s Dividend Move
Strategist David Kostin at Goldman Sachs is revising the S&P 500 (SP500) (NYSEARCA:SPY) (IVV) (VOO) DPS forecast, lifting it to 6% from the previous estimate of 4%. This growth projection remains steady at 5% for the year 2025.
“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 commented. He added, “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.”
Kostin went on to say, “The dividend futures market implies 3% S&P 500 DPS growth in 2024, a 4 pp increase from -1% since the end of October.”
Implications for Other Major Players
Goldman Sachs also contemplated the potential impact if other major firms, such as GOOGL and AMZN, were to declare dividends. Kostin highlighted, “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.”
He further explained, “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%).”
Kostin reasoned that in contrast to 2023 when banks aimed to preserve capital, the forecast for 2024 suggests a different scenario. He stated, “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.” Consequently, Goldman’s analysts projected an average 10% increase in dividends for the GSIBs in 2024.
Screening for Potential Impact
Moreover, Goldman Sachs conducted a screening exercise for the largest non-dividend-paying S&P 500 stocks, assuming a hypothetical payout of 10%. The analysis calculated the potential increase in the S&P dividend per share for 2024 based on these assumptions.
- Alphabet (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), $0.60, $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%)
