It looks like T. Rowe Price Group, Inc. (NASDAQ:TROW) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase T. Rowe Price Group's shares on or after the 14th of September, you won't be eligible to receive the dividend, when it is paid on the 29th of September.
The company's next dividend payment will be US$1.20 per share, on the back of last year when the company paid a total of US$4.80 to shareholders. Looking at the last 12 months of distributions, T. Rowe Price Group has a trailing yield of approximately 3.9% on its current stock price of $124.39. If you buy this business for its dividend, you should have an idea of whether T. Rowe Price Group's dividend is reliable and sustainable. So we need to investigate whether T. Rowe Price Group can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately T. Rowe Price Group's payout ratio is modest, at just 44% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see T. Rowe Price Group's earnings per share have risen 17% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, T. Rowe Price Group has lifted its dividend by approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is T. Rowe Price Group an attractive dividend stock, or better left on the shelf? Companies like T. Rowe Price Group that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, T. Rowe Price Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
On that note, you'll want to research what risks T. Rowe Price Group is facing. Our analysis shows 1 warning sign for T. Rowe Price Group and you should be aware of this before buying any shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here