Stock Market

If you feel that 2023’s financial-sector crisis has passed, you might be tempted to load up on Goldman Sachs (NYSE:GS) stock. Yet, a top executive at Goldman Sachs recently issued a warning that investors should pay attention to. Along with that, Goldman Sachs’s planned staff reduction suggests that the company’s management might anticipate near-term challenges.

Don’t get the wrong idea. Goldman Sachs is still a giant bank and doesn’t belong in the same category as SVB Financial Group (OTCMKTS:SIVBQ) subsidiary Silicon Valley Bank and Signature Bank (OTCMKTS:SBNY).

As we’ll see, Goldman Sachs is still a solid dividend payer and isn’t vastly over-valued. That said, it’s wise to take note of Goldman Sachs’s latest round of layoffs and consider their implications.

Goldman Sachs Offers Industry-Favorable Yield

Does Goldman Sachs provide great yield and a good value to its shareholders? The answer is: definitely, and maybe. Comparatively speaking, Goldman Sachs offers an attractive and safe dividend, but possibly not the best value.

Let’s break this down with some stats. Goldman Sachs’s forward annual dividend yield of 2.98% is higher than the sector average yield of 2.114%. Also, Goldman Sachs’s dividend payout ratio is 35.6%, indicating that it’s a sustainable dividend. (When the payout ratio exceeds 50%, I start to wonder whether a company is distributing too much of its earnings to the shareholders.)

What about value? Goldman Sachs has a trailing-12-month (TTM) price-to-earnings (P/E) ratio of 11.95x, which doesn’t sound excessive. However, the sector median P/E ratio is 9.42x, so even if GS stock is a hold (in my opinion) at its current valuation, it’s probably not a screaming buy right now.

What Upcoming Layoffs Mean for GS Stock

Another reason that financial traders need to be careful is that Goldman Sachs’s management just issued an important warning. Plus, the company is implementing another round of layoffs.

As you may recall, Goldman Sachs announced up to 3,200 employee cuts in January. Now, according to Chief Operating Officer John Waldron, Goldman Sachs is preparing to let go of approximately 250 more workers.

An additional 250 job cuts might not sound like a big deal. Yet, financial traders should consider the bigger-picture implications. Bear in mind, corporations don’t typically reduce their headcounts when they’re growing and thriving.

Waldron drove this point home when he warned, “The macro backdrop is extraordinarily challenging.” Furthermore, Waldron explained, “If you think about global banking and markets, the capital markets activity is more sluggish.”

On top of all that, Waldron observed that equities and fixed-income “activity levels are more muted.” It’s not every day that top-level bank executives offer such explicit cautionary signals. Therefore, Goldman Sachs’s layoffs may indicate that the company’s insiders are concerned about the bank’s near-term prospects.

GS Stock Looks Like a Hold but Not a Strong Buy

Income-focused investors don’t need to panic-sell their Goldman Sachs shares. The company offers a reasonably safe dividend and it’s a gigantic bank, so 2023’s financial-sector crisis probably won’t cause Goldman Sachs to collapse.

On the other hand, Goldman Sachs’s latest round of layoffs and Waldron’s comments should make prospective investors feel cautious. Hence, it’s fine to hold GS stock if you already own it, but there’s no pressing need to add to your share position right now.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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