We recently compiled a list of the 7 Cheap Quarterly Dividend Stocks to Invest in. In this article, we are going to take a look at where The Goldman Sachs Group, Inc. (NYSE:GS) stands against the other cheap quarterly dividend stocks.

Growth stocks are typically seen as companies with the potential to outperform the market in the future, even if they are currently unprofitable or trading at high valuations. While they offer the possibility of substantial returns, they also come with significant risks. In contrast, value stocks tend to perform well when the broader economy is expanding. These are well-established companies with consistent profits, many of which pay dividends. Investors are drawn to them because they are often perceived as undervalued relative to their true worth. Sectors like banking, utilities, and healthcare fall into this category. Historically, value stocks have outpaced growth stocks for much of the market’s history, but that trend has reversed over the past decade.

Over the past five years, the growth stocks in the Vanguard Fund have surged approximately 111%, with much of the increase occurring after the fourth quarter of 2022. This momentum was largely driven by major tech firms introducing artificial intelligence products and services, which accelerated earnings growth and lifted valuations. Meanwhile, value stocks have struggled to keep pace. Since late 2022, the value stocks in the Vanguard Fund have lagged behind its growth-focused counterpart and have gained only 48% over the past five years. In theory, this gap suggests value stocks could eventually rebound. Many of these companies continue to generate profits and return a portion to shareholders, so at some point, buyers may step in, pushing their performance closer to historical norms.

By the end of 2024, the value fund was trading at around 16 times its projected earnings for the year, significantly lower than the growth fund, which was valued at approximately 27 times earnings. This represents a roughly 40% discount, compared to the average 30% gap over the past decade, according to Barron’s analysis of FactSet data. This valuation gap makes value stocks look more appealing. If these companies deliver earnings in line with or above analysts’ expectations, they could demonstrate to the market that they are worth more than their current prices suggest, potentially leading to strong stock performance.

Also read: 15 Best Monthly Dividend Stocks To Buy Right Now

As noted earlier, value stocks are often associated with dividend payments. These stocks typically offer higher dividend yields and stronger fundamental ratios compared to growth stocks. When it comes to dividend investing, dividend growth plays a crucial role. The Dividend Aristocrats Index serves as a key benchmark for dividend-focused strategies, tracking companies that have increased their payouts for at least 25 consecutive years.

A report by S&P Dow Jones Indices highlighted that investment strategies focused on income generation tend to display value-oriented characteristics. Stocks with high dividend yields and lower valuations frequently attract investor interest. However, the report also pointed out that the Dividend Aristocrats Index blends both growth and value traits rather than leaning heavily toward one style. A comprehensive analysis of the index from 1999 to 2022 revealed that, on average, 59.04% of its holdings were value stocks, while 40.94% were classified as growth stocks. Given this, we will take a look at some of the best cheap quarterly dividend stocks to invest in.

Our Methodology:

For this list, we scanned through Insider Monkey’s database of 900 hedge funds as of Q3 2024 and selected dividend companies with strong dividend histories and yields of at least 1%, as of January 30. From that list, we picked dividend stocks with forward P/E ratios below 16, as of January 30. The low price-to-earnings ratio shows that they are traded below their intrinsic value. The stocks are ranked in descending order of their P/E multiples. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

The Goldman Sachs Group, Inc. (NYSE:GS)

Forward P/E Ratio: 13.74

The Goldman Sachs Group, Inc. (NYSE:GS) is a New York-based multinational investment banking company that offers a wide range of financial services to its consumers. In the fourth quarter of 2024, the company reported revenue of $13.87 billion, reflecting a 23% increase compared to the same period last year. For the full year, the company’s assets under supervision rose by 12%, reaching a record $3.14 trillion. In addition, its book value per common share increased by 7.4%, reaching $336.77. The company also ended the year with a robust cash position, holding $182 billion in cash and cash equivalents, up from $155 billion the previous quarter.

A significant portion of The Goldman Sachs Group, Inc. (NYSE:GS)’s operations is its asset and wealth management division, which oversees trillions of dollars in assets and contributes significantly to its revenue. Investors are focused on expanding this segment, as its stable revenue stream supports higher market valuations. The firm is also shifting to a more capital-efficient approach by cutting back on equity and debt investments. This strategy enhances growth potential, improves stability, and increases the company’s reliance on income from fees. In the past 12 months, the stock has surged by nearly 68%.

The Goldman Sachs Group, Inc. (NYSE:GS) has consistently paid its shareholders dividends since 1999. In FY24, the company returned $3.8 billion to shareholders in the form of dividends. On January 15, it announced a quarterly dividend of $3.00 per share, maintaining the same amount as its previous dividend. The stock’s dividend yield on January 30 came in at 1.85%.

Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 72 funds owned stakes in The Goldman Sachs Group, Inc. (NYSE:GS), up from 68 in the previous quarter. These stakes are collectively valued at over $5.6 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q3.

Overall GS ranks 4th on our list of the cheap quarterly dividend stocks to invest in. While we acknowledge the potential for GS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.