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Why T. Rowe Price (TROW) is a Great Dividend Stock Right Now
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
T. Rowe Price in Focus
T. Rowe Price (TROW - Free Report) is headquartered in Baltimore, and is in the Finance sector. The stock has seen a price change of 9.87% since the start of the year. The financial services firm is currently shelling out a dividend of $0.9 per share, with a dividend yield of 2.69%. This compares to the Financial - Investment Management industry's yield of 1.89% and the S&P 500's yield of 1.65%.
Looking at dividend growth, the company's current annualized dividend of $3.60 is up 18.4% from last year. Over the last 5 years, T. Rowe Price has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.20%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. T. Rowe's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TROW expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $8.67 per share, with earnings expected to increase 7.43% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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Why T. Rowe Price (TROW) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
T. Rowe Price in Focus
T. Rowe Price (TROW - Free Report) is headquartered in Baltimore, and is in the Finance sector. The stock has seen a price change of 9.87% since the start of the year. The financial services firm is currently shelling out a dividend of $0.9 per share, with a dividend yield of 2.69%. This compares to the Financial - Investment Management industry's yield of 1.89% and the S&P 500's yield of 1.65%.
Looking at dividend growth, the company's current annualized dividend of $3.60 is up 18.4% from last year. Over the last 5 years, T. Rowe Price has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.20%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. T. Rowe's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TROW expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $8.67 per share, with earnings expected to increase 7.43% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).