Can a Dividend Hike be Insincere?

The glitter on this year’s dividend bandwagon sparkled brighter this week when Goldman Sachs (GS) boosted the quarterly payout on its common shares to 46 cents per share from 35 cents. Goldman’s first dividend increase in six years was an upbeat element of the banking giant’s otherwise guarded first-quarter financial report. Analysts noted that Goldman Sachs’ dividend boost represented yet another way of handing cash to company insiders, who control 10% per the stock.

The Wall Street Journal noted that Goldman’s dividend hike comes as the bank has been trimming its stock buybacks – another form of returning value to shareholders. It’s better to have a bigger pie than just different sizes of slices. Goldman’s tactical use of dividends and share repurchases is evident in comparison with regular dividend booster Exxon Mobil (XOM). Both companies have the profitability and balance sheet strength to afford direct rewards to shareholders. But Exxon Mobil has a more balanced program.

Source: Forbes

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