Goldman Sachs Raised Its Dividend as Investment Banking Fees Rebound. Is the Stock a Buy?

One of the leading investment banks in the world, Goldman Sachs (NYSE: GS), recently stated its intention to raise its quarterly dividend by 11% to $5.00 per share, up from $4.50 per share.

The dividend raise comes after the bank passed the Federal Reserve's annual stress test with flying colors. Goldman Sachs, like many other large banks, has been in the cycle of raising its dividend in the third quarter, after the annual stress test results come out. This will mark the 15th consecutive year that Goldman Sachs has raised its dividend.

The stress test results, designed to measure a large bank's capital strength in the event of a major recession or economic shock, showed that Goldman Sachs has more than adequate capital to navigate a downturn. Its score came in above the median common equity tier 1 capital ratio among the 32 banks in the severely adverse test scenario the Fed presented.

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"Today's announcement reflects the continued strength of our earnings and capital position, and our commitment to delivering sustainable, long-term returns to shareholders," Goldman Sachs Chairman and CEO David Solomon said. "Our planned dividend increase reflects the strength of our franchise, our earnings power, and our confidence in our ability to support clients, invest for the long term, and deliver sustainable returns to shareholders."

Blowout year for M&A

Goldman Sachs has been having an excellent year in 2026, with its stock price up about 16.5% year to date. Goldman Sachs has been fueled by a robust mergers and acquisitions (M&A) market. The first quarter was among the best ever, with some $1.2 trillion in deals, up 26% year over year.

Among the major investment banks, Goldman Sachs derives a higher percentage of its revenue from investment banking and M&A than its chief competitors, so when M&A is hot, Goldman Sachs stock will typically see bigger gains. When M&A cools, it would likely go the other way, leading to a larger drawdown for Goldman Sachs.

In the first quarter, Goldman Sachs saw revenue increase 14% year over year, driven by investment banking, which posted a 48% increase.

Goldman Sachs reports second-quarter earnings on July 14, and they could be big. The M&A market has remained hot, highlighted by the massive IPO of Space Exploration Technologies, for which Goldman Sachs is the lead underwriter. According to a Marketwatch report, it could be one of the biggest underwriting payouts for an investment bank ever. Goldman Sachs could earn $100 million in fees from the SpaceX deal alone, according to a CNBC report.

Goldman Sachs and Morgan Stanley have been tapped as the lead underwriters for the upcoming OpenAI and Anthropic IPOs, which will also be massive when they hit over the next 12 months.

With the M&A market expected to have its best year since 2021 in 2026, Goldman Sachs stock looks like a great buy right now, trading at 18 times forward earnings.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.