Goldman Sachs dazzled Wall Street once again on Tuesday by reporting better-than-expected earnings while their investment banking brethren fell on their faces. How did they do it? We will never know for sure, but they have their ways.

Goldman Sachs is clearly the class act on Wall Street and have hired nothing but the best and the brightest down through the years. In order to do so, Goldman pays its employees very well, very well indeed. How's an average of $661,490 per employee sound to you? About 60% of this compensation, or $396,894, comes from bonuses. Does this seem a little extreme to you? Well it does to me and I think I'm fairly reasonable when it comes to matters of compensation. I don't rant and rave about excessive executive pay like the "do nothings" in the media do, but there are limits to my generosity.

These limits are defined by what the shareholders get in return. For example, Goldman's stock closed last year at $199.35 per share. It went as low as $164.90 and as high as $247.92 per share this year, and is trading currently at $209.60, up $6.93 for the day and $10.25 for the year. Wow, is a 5% annual gain worth $12.1 billion in bonuses? I don't think so, but what about its dividend? Surely, it must be very generous.

Uga, uga. Uga, boo, boo uga. It's only a crummy $1.40 a share, giving a yield of less than 1%. I would have thought that a company that can pay the equivalent of $30.48 per share in bonuses to its employees would do better than that for its shareholders. Even if Goldman paid $1.40 per share each quarter, the dividend yield would still be less than 3% and, I'd bet, the stock price would be higher.

Sure, Goldman is using some of its bounty to buy back shares of its stock, but that helps compensate employees who are shareholders as much as it does non-employee shareholders. And it's not chump change either. The number of shares decreased from 428 million to 397 million over the past twelve months. At $200 per share, the 31 million shares cost about $6.2 billion, about half of what Goldman spent on bonuses. Goldman also plans to buy another 30 million shares in the near future. This is great, but it doesn't have the visibility of a more generous dividend payment.

Yes, Goldman is a great company and one of its strengths is helping clients increase shareholder value. I'd say it needs to eat its own cooking. VectorVest values Goldman at $310.51 per share, so why is it floundering at $200 a share? My guess is that its shareholders are not getting a fair share of The Gold in Goldman.

AGGRESSIVE REBOUNDERS.
Jumping into a market bottom is an act of aggression but it's one of the best ways to make a lot of money. That's why we work so hard to make it easy. Mr. Gordon White will show us how easy and profitable it can be in this week's "Strategy of the Week." Visit the VectorVest University to see Gordon's presentation on Aggressive Rebounders.