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Investing.com -- Goldman Sachs analysts project that S&P 500 dividends will grow by 6% year-over-year in 2025, despite recent market volatility.
“We forecast S&P 500 dividend growth of 6% year/year in 2025, which represents a payout ratio of 30% and dividends of $80 per share,” the investment bank stated.
The forecast comes amid a 6% selloff in the S&P 500 from its February high, yet Goldman notes that dividend pricing has remained stable.
“Unlike the equity market, dividends did not price in post-election exuberance and have been notably resilient amid market volatility,” analysts wrote.
They argue that while the equity market’s growth expectations have moderated in line with Goldman’s economic forecasts, “dividend futures appear to price a pessimistic outlook relative to our forecasts.”
Goldman’s projection is based on expectations for corporate earnings, with analysts stating, “S&P 500 EPS grew by 10% year/year in 2024 and we forecast 9% EPS growth in 2025.”
However, they add that there are both upside and downside risks to their estimates.
The firm highlights that “the main upside risk to our forecast is the potential for excess capital return from Financials due to regulatory reform.”
Goldman states that if realized, this could boost dividend growth to 8% in a modest scenario and 9% in a more optimistic scenario.
On the downside, the bank acknowledges risks from slowing economic growth, as its economists recently lowered their U.S. GDP forecast.
“Our economists lowered their Q4/Q4 US GDP growth forecast to 1.7% (from 2.2%), which reduces 2025 annual average GDP growth to 2.0% (from 2.3%),” wrote Goldman.
However, the firm says that these revisions present “only modest risks to our forecast of 6% dividend growth.”