By Sam Boughedda
Goldman Sachs analysts told investors in a note Monday that the cash spending outlook supports stocks paying dividends over those focusing on repurchasing shares.
"While investors await earnings results, S&P 500 dividends registered year/year growth of 8% in 1Q 2023. This strong start to the year presents upside risk to our S&P 500 DPS forecast of 5% growth in 2023, but banking stress and the likelihood of tightening lending standards and slowing economic growth are downside risks," the analysts explained.
They added that the outlook for corporate buybacks is "less favorable, and a slowdown is already in motion," with buybacks said to have declined by 21% year-on-year in the fourth quarter, while companies will likely report a further slowdown in 1Q.
"The difference in outlooks for dividend and buyback growth suggests firms focusing on dividends will continue to outperform buyback stocks," said analysts.