Friday, March 25, 2011

Stock Analysis: T. Rowe Price Group

T. Rowe Price Group, Inc. (TROW) is a publicly owned asset management holding company. The firm primarily provides its services to individual and institutional investors, retirement plans, and financial intermediaries. The company is a dividend achiever which has increased distributions for 24 years in a row. The most recent dividend increase was in February, when the Board of Directors approved a 14.80% increase to 31 cents/share. The major competitors of T. Rowe Price Group include Blackrock Inc (BLK), Eaton Vance (EV) and Franklin Resources (BEN).

Over the past decade this dividend stock has delivered an annualized total return of 13.90% to its loyal shareholders.

The company has managed to deliver an impressive increase in EPS of 14.30% per year since 2001. Analysts expect T.Rowe Price Group to earn $3.23 per share in 2011 and $3.81 per share in 2012. This would be a nice increase from the $2.53/share the company earned in 2010.

The trend in return on assets has closely followed the annual fluctuations in the stock markets. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment has increased by 14.90% per year since 2001, which is lower than the growth in EPS. A 15% growth in distributions translates into the dividend payment doubling every five years. If we look at historical data, going as far back as 1987, we see that T. Rowe Price has actually managed to double its dividend every four years on average.


Over the past decade the dividend payout ratio has been characterized by short spikes during bear markets of 2001-2003 and 2007-2009.. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently T.Rowe Price is trading at 25.50 times earnings, yields 1.90% and has a sustainable dividend payout. The stock would meet my entry criteria if it fell under $50.

Full Disclosure: None

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- Eaton Vance (EV) Dividend Stock Analysis
- Eleven Dividend Machines Beating Inflation
- Sixteen Consistent Dividend Payers Raising Dividends
- The New Dividend Aristocrats

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