Buybacks and Dividends All That's Left in S&P 500, Goldman Says

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Bloomberg By Joseph Ciolli
1 hour ago


The $1 trillion that U.S. companies are on track to return to shareholders this year will constitute the market’s entire return in 2015, according to Goldman Sachs Group Inc.

Dividends and buybacks will be responsible for supporting a market where the median stock in the Standard & Poor’s 500 Index is trading at 18.2 times earnings, putting it in the 99th percentile of historical valuation, the firm said in a note to clients. Goldman Sachs forecasts that the S&P 500 will rise to 2,150 by mid-year before fading to 2,100 by the end of 2015.

Not only will dividends supply all the market’s upside, but companies that pay the most are poised to bounce back in 2015’s second half, analysts led by David Kostin wrote. Stocks with the biggest payouts from utilities to real-estate investment trusts have trailed the S&P 500 since January as higher bond yields lured investors.

S&P 500 stock values “have limited scope for further upward expansion,” a group of Goldman Sachs analysts including Kostin, the firm’s chief U.S. equity strategist, wrote in a May 15 client note. “Dividend yield will be the sole contributor to total return during the next 12 months,” they said.

Goldman’s year-end projection for the S&P 500 would mark a 1.3 percent decline from Tuesday’s closing level. The benchmark gauge for American equity fell 0.2 percent to 2,123.90 at 9:39 a.m. in New York.

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