This is Why T. Rowe Price (TROW) is a Great Dividend Stock
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does T. Rowe Price (TROW) have what...
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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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
Based in Baltimore, T. Rowe Price (TROW) is in the Finance sector, and so far this year, shares have seen a price change of 42.04%. The financial services firm is paying out a dividend of $4.08 per share at the moment, with a dividend yield of 2.01% compared to the Financial - Investment Management industry's yield of 1.55% 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. 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 15.60%. 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 37%, which means it paid out 37% 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 $12.91 per share, representing a year-over-year earnings growth rate of 34.76%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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 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
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