In the current operating backdrop, the financial sector is deteriorating, given the regional banking crisis and expectations of economic slowdown/recession in the near term. Hence, solid dividend-yielding stocks should be on investors’ radar. Today, we are discussing one such stock – T. Rowe Price Group, Inc. TROW.
Headquartered in Baltimore, MD, T. Rowe Price is a global investment management organization that provides a broad array of mutual funds, sub-advisory services and separate account management for individual and institutional investors, retirement plans and financial intermediaries.
TROW has been increasing its quarterly dividend on a regular basis, with the last hike of 1.7% to $1.22 per share announced in February 2023. Also, during the third quarter of 2021, it paid out a special cash dividend of $3 per share. Over the past five years, the company increased dividend five times, with an annualized dividend growth rate of 14.78%.
Considering last day’s closing price of $108.38, TROW’s current dividend yield is 4.5%. This is impressive compared with the S&P 500’s average of 1.84% and attractive for investors as it represents a steady income stream.
T. Rowe Price Group, Inc. Dividend Yield (TTM)
T. Rowe Price Group, Inc. dividend-yield-ttm | T. Rowe Price Group, Inc. Quote
Is the TROW stock worth a look to earn a high dividend yield? Let’s check out the company fundamentals to understand risk and rewards. This will help us make a proper investment decision.
In the first quarter of 2023, TROW returned around $283.4 million of capital to shareholders, comprising $280.7 million of dividends on common shares and repurchases worth $2.7 million. The share repurchase plan was increased by 10 million shares in 2020, bringing the total authorization to 22.4 million shares.
T. Rowe Price has substantial liquidity, which includes total cash and investments of $4.49 billion as of Mar 31, 2023. This will aid sustainable capital deployment activities in the upcoming period.
However, per management, share repurchase activity is expected to be reduced in 2023 from 2021 and 2022 levels.
T. Rowe Price has scaled business and expanded its operations through numerous acquisitions. In December 2021, it acquired Oak Hill Advisors, L.P. (OHA) to bulk up its offerings in the alternative investment market space.
Recently, in April 2023, it acquired Retiree, a fintech firm which provides innovative retirement income planning software. This will expand its existing retirement capabilities, enable a comprehensive suite of retirement income solutions for investors and practitioner tools for financial professionals.
Organic growth remains a key strength at T. Rowe Price, with revenues rising over the years. The company also remains focused on enhancing investment capabilities, broadening distribution reach and improving its individual-investor-client experience.
Revenue growth has been supported by its diversified assets under management (AUM) across asset classes and client base. TROW has a solid AUM balance which has been growing over the years. However, the trend declined in first-quarter 2023 due to weaker markets.
Nonetheless its strong brand, consistent investment track record and decent business volumes will support AUM growth. We estimate AUM balance to grow 3.1% in the current year.
On the flip side, T. Rowe Price’s bottom-line growth continues to suffer from rising costs. Also, overdependence on investment advisory fees and U.S. equity assets amid expectations of economic slowdown are concerning. Nonetheless, a solid AUM balance, business diversification and global reach are likely to support TROW’s growth.
Over the past three months, shares of TROW have lost 4.5% compared with the industry’s fall of 10.4%.
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TROW currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Finance Stocks Worth Considering
A couple of other finance stocks, like Associated Banc-Corp ASB and Invesco Ltd. IVZ, are worth a look as these have robust dividend yields.
Considering the last day’s closing price of $15.11 per share, ASB’s current dividend yield is 5.56%. Over the past six months, shares of ASB have lost 34.9%.
Based on the last day’s closing price of $14.74 per share, IVZ’s present dividend yield is 5.43%. Over the past six months, shares of IVZ have lost 20.7%.
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