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Are You Looking for a High-Growth Dividend Stock? T. Rowe Price (TROW) Could Be a Great Choice

Is (HRS) Outperforming Other Computer and Technology Stocks This Year?

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 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

Headquartered in Baltimore, T. Rowe Price (TROW) is a Finance stock that has seen a price change of 4.1% so far this year. The financial services firm is paying out a dividend of $0.7 per share at the moment, with a dividend yield of 2.56% compared to the Financial - Investment Management industry's yield of 2.66% and the S&P 500's yield of 1.81%.

In terms of dividend growth, the company's current annualized dividend of $2.80 is up 22.8% from last year. T. Rowe Price has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.92%. Future dividend growth will depend on earnings growth as well as 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 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.

TROW is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $7.33 per share, which represents a year-over-year growth rate of 34.99%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that TROW is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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