Goldman Sachs: As U.S. stocks face a sell-off, dividend futures have attractive hedging appeal

According to the Zhitong Finance APP, Goldman Sachs analysts stated in a report last Friday that amid the recent sell-off in the U.S. stock market, dividend futures present an attractive investment opportunity for investors who can withstand risks such as liquidity shortages and volatility.

Goldman Sachs analyst David Kostin noted in a report on March 7 that "despite the S&P 500 index falling 6% from its February peak, the pricing for dividend futures growth in 2026 remains stable at 1%. Unlike the stock market, dividends do not reflect the post-election boom and show significant resilience amid market volatility."

Dividend futures are exchange-traded derivative contracts that allow investors to establish positions on future dividend payments. Dividend futures can be based on a single company, a basket of companies, or a stock index.

Goldman's report stated, "Investors holding dividend futures contracts will ultimately receive dividends based on the level of realized dividends per share. Although liquidity for longer-term contracts has weakened, investors will see returns as futures market pricing aligns with our fundamental forecasts."

Economic Outlook

After Trump won the presidential election, the U.S. stock market surged, but this optimism has given way to concerns that Trump's tariff policies will weigh on the economy. The report noted that with the sell-off since last month, the stock market's pricing for economic growth is more in line with Goldman economists' predictions.

These economists recently lowered their forecast for U.S. GDP growth in the fourth quarter of 2025 from 2.2% to 1.7%. This downgrade led to a reduction in the average annual growth forecast for the U.S. in 2025 from the previous 2.3% to 2.0%.

The bank stated, "This poses downside risks to our current forecast of 9% earnings growth per share for the S&P 500 index, but only moderate risks to our forecast of 6% dividend growth. The historically limited decline in S&P 500 dividends is another reason to invest in S&P 500 dividends."

Resilient Dividends

The report indicated that during past economic recessions, dividends typically fell by 1%, while earnings per share dropped by 11%, and stock prices fell by 24%. The 2008 financial crisis was an exception, during which dividends plummeted by 24%, primarily due to a 74% drop in payouts from financial services companies. Excluding financial stocks, dividends only fell by 6%.

Goldman Sachs analysts expect that by 2025, the annual dividend growth rate for S&P 500 constituents will reach 6%, consistent with a 30% payout ratio and an $80 dividend per share. Since 1990, the payout ratio ranks in the 22nd percentile.

Goldman stated that regulatory reforms under the Trump administration could lead financial services companies to pay dividends higher than currently expected, which is a key upside possibility that analysts have not yet incorporated into their forecasts. The Federal Reserve's annual Comprehensive Capital Analysis and Review (CCAR) of the largest bank holding companies—commonly referred to as "stress tests"—could impact dividend payments in the financial sector.

Goldman noted, "Last year, most banks participating in the 2024 CCAR tests subsequently announced dividend increases. This year's test results may be announced in June." One of the biggest risks facing dividend prospects is an economic slowdown. Goldman Sachs stated: "The rise in policy uncertainty due to tariffs has put pressure on corporate and consumer confidence, and recent economic surprises have turned negative. Increased uncertainty may limit management's willingness to significantly raise dividends, even if the fundamentals remain resilient."

Goldman Sachs listed the biggest contributors to the S&P 500 index's earnings per share dividends in 2025: