Chief US Equity Strategist David Kostin says corporate dividends should continue to rise.As fears about a recession intensified in 2022, experts started telling investors to prioritize stocks that delivered dependable returns through dividends and stock repurchases.
But Goldman Sachs Chief US Equity Strategist David Kostin says investors might not want to depend on buybacks any longer. Kostin thinks buybacks by S&P 500 companies will dip 10% this year. In contrast, he wrote that the dividends of S&P 500 companies already looked stronger in the first quarter of 2023 than they did a year earlier. In fact, he anticipates that the dividend payments of S&P 500 companies will rise by 5% this year, and could continue to grow from there.
He added that big-dividend companies tend to outperform big stock repurchasers when overall dividend growth is better than buyback growth, which is what Kostin expects will happen going forward. The current state of the economy also favors the hefty dividend payers above other cash-rich companies.
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