Yahoo Finance Why T. Rowe Price (TROW) is a Great Dividend Stock Right Now
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
T. Rowe Price in Focus
T. Rowe Price (TROW) is headquartered in Baltimore, and is in the Finance sector. The stock has seen a price change of 6.7% since the start of the year. The financial services firm is currently shelling out a dividend of $1.24 per share, with a dividend yield of 4.32%. This compares to the Financial - Investment Management industry's yield of 2.7% and the S&P 500's yield of 1.59%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.96 is up 1.6% from last year. In the past five-year period, T. Rowe Price has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.84%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. T. Rowe's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TROW for this fiscal year. The Zacks Consensus Estimate for 2024 is $8.84 per share, which represents a year-over-year growth rate of 16.47%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, TROW is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report