Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
T. Rowe Price (TROW) is headquartered in Baltimore, and is in the Finance sector. The stock has seen a price change of -8.79% since the start of the year. Currently paying a dividend of $1.27 per share, the company has a dividend yield of 4.92%. In comparison, the Financial - Investment Management industry's yield is 2.97%, while the S&P 500's yield is 1.52%.
Looking at dividend growth, the company's current annualized dividend of $5.08 is up 2.4% 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 5.97%. 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 55%, meaning it paid out 55% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TROW for this fiscal year. The Zacks Consensus Estimate for 2025 is $9.38 per share, representing a year-over-year earnings growth rate of 0.54%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, TROW presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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T. Rowe Price Group, Inc. (TROW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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