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Why T. Rowe Price (TROW) is a Great Dividend Stock Right Now
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 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
Based in Baltimore, T. Rowe Price (TROW - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 14.59%. The financial services firm is currently shelling out a dividend of $0.9 per share, with a dividend yield of 2.49%. This compares to the Financial - Investment Management industry's yield of 1.85% and the S&P 500's yield of 1.39%.
Looking at dividend growth, the company's current annualized dividend of $4.32 is up 20% 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 13.43%. 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. Right now, T. Rowe's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TROW expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $11.81 per share, representing a year-over-year earnings growth rate of 23.28%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that TROW is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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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. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 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
Based in Baltimore, T. Rowe Price (TROW - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 14.59%. The financial services firm is currently shelling out a dividend of $0.9 per share, with a dividend yield of 2.49%. This compares to the Financial - Investment Management industry's yield of 1.85% and the S&P 500's yield of 1.39%.
Looking at dividend growth, the company's current annualized dividend of $4.32 is up 20% 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 13.43%. 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. Right now, T. Rowe's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TROW expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $11.81 per share, representing a year-over-year earnings growth rate of 23.28%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that TROW is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).