Edited By Abby Tabuga
Goldman Sachs (GS) is one of the leading investment firms in the world. The company provides various financial services to a diversified clientele. The New York-based firm maintains offices in key financial centers around the world. Its operations are segmented in four main lines - investment banking, institutional client services, investing and lending, and investment management. As of June 30, 2012, Goldman employs a total of 32,300 employees.
The investment firm continues to wrestle the effects of a waning economy. In the second quarter, Goldman reported a revenue decline of 9% from last year and a decline in its profit of 12%. On a positive note, Goldman Sachs has recently been cleared of wrongdoing in a subprime mortgage deal that transpired in 2006.
In the second quarter, Goldman bought 483 new stocks and sold 418. This article reports Goldman Sachs' top dividend stocks. These are Altria Group (MO), Philip Morris (PM), General Electric (GE), Microsoft (MSFT), and Exxon Mobil (XOM). In this article, I also briefly show the historical holdings of Sachs' in these stocks to present a more profound account of its investment moves.
Shares Held (Million)
% of Portfolio
EPS Growth (This Year)
EPS Growth (Next Year)
Exxon Mobil Corp.
Source: Finviz.com, Nasdaq.com, Whalewisdom.com;
Dividend Amount (Annual)
Altria Group, Inc. is a holding company whose subsidiaries include Philip Morris USA, UST LLC, and John Middleton Co. These subsidiaries engage in manufacturing and sale of cigarettes, smokeless products, large cigars, pipe tobacco, and wine. Aside from these, Altria Group's portfolio also includes financial services through its subsidiary Philip Morris Capital Corporation. In the second quarter, MO has exceeded Wall Street's expectations as it outpaced the broader industry in terms of domestic shipment volume and experienced a 7.6% growth in smokeless volume. It has a market capitalization of around $67 billion.
Goldman Sachs' current level of holdings of MO is at 38 million shares, roughly amounting to $1.3 billion. MO forms 0.59% of the company's total portfolio in the second quarter. The last instance that Goldman held about the same percentage of MO stocks was 10 quarters ago, during the first quarter of 2010. This is the first time in the last 2 years that Goldman has bought more than 20 million shares of the company, and only the 3rd buying instance during the same period.
MO's yield is at a high 5.34%. Its annual dividend amount has been consistently rising since 2009 at an average rate 9% per year. In terms of earnings, the EPS growth is expected to be higher next year at 7.69% compared with this year's shrinking of -12.56%. MO's profit margin is a high 18.19% and has been increasing in the last 3 quarters.
Philip Morris engages in the manufacture and sale of tobacco products in 180 countries outside of the U.S. In June 2011, the company completely acquired a Jordan-based cigarette business, an addition to a joint venture it established with the Vietnam National Tobacco Corporation (Vinataba) earlier that year. The maker of Marlboro Brand caters to different income groups as its products are segmented into premium-, mid-, and low-priced brands. As of end of 2011, the New-York based holding company owns and operates 55 manufacturing facilities and maintains manufacturing relationships with various third-party manufacturers around the world. In June of the current year, the cigarette company forecast earnings below Wall Street estimates due to a strong dollar that is hurting its sales abroad.
Goldman Sachs holds about 10.5 million PM shares valued at roughly $1.35 billion in the second quarter. It forms 0.60% of the company's total portfolio. The last instance that Goldman held a comparable amount of PM stocks was during the first quarter of 2010, when PM accounted for 0.82% of Goldman's portfolio. This second-quarter purchase is by far the largest Goldman has made on PM in the last 2 years. It is noted from Whalewisdom.com data that Goldman has been continuously selling its stocks on PM prior to the 3rd quarter of 2011.
PM's dividend yield is at a high 3.44%. The annual dividend amount has been steadily rising since 2008 at an average rate of 20%. Back then, the amount stood only at $1.54. In 2011, this rose to $2.82. The payout ratio of PM has also declined to 61.21% from its historical ratio of 77.49%.
The tobacco company has shown remarkable growth in earnings. In the last five years, PM's revenue has swelled by 38%, which is rather exceptional for one that engages in a mature industry. Its EPS growth this year is an impressive 23.58% while the estimated EPS growth for next year is at 11.20%. In terms of cash flows, PM's has increased by 51% in the past five years.
GE is known worldwide as a technology innovator that has propelled the industry toward technological sophistication. Founded in 1892, GE maintains a tradition of quality it has carried for over a century. It has a market capitalization of $233 billion. The Fairfield-based industrial giant currently has six business segments - energy infrastructure, aviation, healthcare, transportation, home and business solutions, and capital. Last July, GE announced operating earnings of $4 billion in the second quarter of 2012, up by 7% from the same period last year.
In the second quarter, Goldman bought 16 million shares of GE, the only purchase it has made since the 2nd quarter of last year. GE now consists 0.71% of the hedge fund's portfolio. Goldman was seen to have been buying GE stocks in 2010. Although it has decreased its position several times after that, it has maintained a position of above 60 million shares in the last 7 quarters. GE is likewise favored by George Soros.
The trailing annual dividend yield is 3.08%. This has been fairly stable at over $3.00 since September 30, 2011. GE's annual dividend payment has been on a slump from 2008 ($1.24) to 2010 ($0.42) although it has shown a slight progress in 2011, at $0.58. The company's payout ratio has improved at 53.01% from a historical ratio of 55.59%. In terms of earnings, GE's EPS growth this year is 7.36%, but is more promising next year with an expected growth of 12.34%.
Microsoft Corporation is known worldwide as a developer of both software and hardware products. MSFT has several divisions; these are the Windows & Windows Live division, Server and Tools division, Online Services Division, Microsoft Business division, and Entertainment and Devices Division. MSFT has a strategic partnership with Nokia (NOK) to develop mobile products and services. Microsoft's Surface Tablet, its latest offering that will compete with the iPad, is due for release on the 26th of October in conjunction with its new Windows 8.
Goldman purchased 28 million shares of Microsoft in the second quarter. This puts the total MSFT holdings of the hedge fund company to over 60 million, or 0.82% of its total portfolio. Goldman's last big buy according to the data by Whalewisdom.com transpired 2 years ago when it purchased over 34 million shares. The hedge fund management has been decreasing its position in the software company continually in the last five quarters prior to the second quarter of 2012.
MSFT's current dividend yield is at 2.56%. The annualized dividend amount for 2011 is at $0.68, up by a huge 21% compared with that of 2010. In fact, MSFT's dividend has been ascending at a rate of 12.5% annually between 2005 and 2011. Its payout ratio, however, has risen from a historical payout of 28.52% to 39.58%. Nevertheless, the profitability of the company is evident in its average net profit margin of 28% in the past 5 years. The software giant sees an EPS growth this year of about 10% and is bracing for even higher growth next year of 23.03%.
Exxon Mobil Corporation engages in oil and gas exploration, production, and transportation. The Texas-based company also has interests in power generation facilities. Incorporated in 1882, Exxon Mobil currently has a market capitalization of $426 billion and operates not only in the U.S. and Canada but also in many other countries worldwide. As of end of December 2011, XOM's share in the net production of synthetic crude oil was at 67,000 barrels per day. Exxon Mobil is the company that made the biggest oil discovery in over a decade in the Gulf of Mexico. Stock prices of oil companies have been on the rise partly due to the Fed's low interest rate policy that has made oil a more appealing investment.
Goldman Sachs currently holds over 21 million XOM shares, which comprise 0.81% of its portfolio. This is the largest holding of Goldman Sachs in XOM during the last 2 years. The hedge fund favors the oil and gas company and has been increasing its position in the last four consecutive quarters.
Exxon Mobil continues to pay higher dividend amounts to its investors each year. Since 2001, the annualized dividend amount has been growing steadily at an average rate of 7% per year. Its current yield is a decent 2.47%. Investors are in for a healthy stream of earnings as the payout declines to 20.85% from a historical rate of 25.60%. EPS growth this year is huge at 35.41% but is expected to decelerate in the following year at 5.20%. The current EPS outperforms that of the industry and competitor BP PLC (BP) but is lower than Chevron's (CVX).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.