Dividend investors: Here's how tax reform will affect you

By MarketsFOXBusiness

Tax reform changing investment plans: Blackstone CEO Schwarzman

Blackstone Chairman and CEO Stephen Schwarzman on the global and domestic impact on President Trump's tax overhaul and investment opportunities in China.

Investors seeking dividends can expect bigger payouts in the years ahead, according to Goldman Sachs (NYSE:GS).

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The bank raised their S&P 500 dividend per share forecasts due to the tax overhaul, noting that a steeper trajectory for EPS growth will result in large dividends.

“We increase our 2018 to 2027 dividend per share forecasts to reflect a faster pace of S&P 500 earnings growth,” Goldman Sachs said in a research note.

The bank’s largest increase to their dividend per share estimates is for 2018, with Goldman expecting 10.4% growth versus their prior forecast for 7.4%. The bank hiked expectations for 2019 dividend growth to 4.9%.

“Historically, dividends have increased at a steady pace related to earnings per share (EPS) growth. We expect S&P 500 EPS will grow by 14% in 2018, including a 5% boost from corporate tax reform,” according to Goldman.

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While the bank noted the historical link between dividends and EPS growth, they said that other potential uses of cash such as M&A, buybacks and capex have exhibited more variability in growth rates.

Goldman will revisit the rest of their cash use forecast following the completion of the fourth-quarter earnings season, after digesting management commentary on how companies plan on deploying tax savings and repatriated cash.

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