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T. Rowe Price (TROW) Hikes Dividend by 20%: Is it Worth a Look?

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Zacks Equity Research
·3 min read
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T. Rowe Price Group, Inc.’s TROW board of directors recently approved a 20% hike in the company’s quarterly common stock dividend. The revised quarterly dividend now totals $1.08 per share compared with the previous figure of 90 cents. The amount will be paid out on Mar 30 to shareholders on record as of Mar 16, 2021.

This marks the 35th consecutive annual dividend raise for this investment manager, reflecting its commitment to return value to shareholders with solid cash-generation capabilities. Prior to this hike, the company had increased its dividend by 18.4% (from 76 cents to 90 cents per share) last February.

We believe despite intense competition, the company has a significant long-term upside potential based on its disciplined risk-aware investment approach, which focuses on diversification, style consistency and fundamental research.

As of Dec 31, 2020, T. Rowe Price remained debt free with substantial liquidity, including cash and sponsored portfolio investment holdings of about $6.2 billion, which supports its ability to continue investing in the future. In addition, T. Rowe Price invested $214.6 million in capitalized technology and facilities using available cash balances during 2020.

Notably, for 2021, the company projects capital expenditures of approximately $265 million, comprising three-fourth for technology development.

Considering last day’s closing price of $165.14 per share, the dividend yield is currently valued at 2.6%.

Investors interested in this Zacks Rank #2 (Buy) stock can have a look at this asset manager’s fundamentals and growth opportunities before making any investment decision. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

T. Rowe Price’s net revenues saw a compounded annual growth rate (CAGR) of 9.7% over the last five years (2016-2020). Additionally, the company remains focused on fortifying business through several planned initiatives, and improving its technology platform and deriving long-term cost efficiencies.

Further, the company has recorded earnings growth rate of 18.2% over the last three to five years. Its expected long-term EPS growth is 11.8%. Also, it recorded a positive earnings surprise of 5.49%, on average, over the trailing four quarters.

T. Rowe Price’s ROE of 32.2% compared with the industry average of 12.74% highlights its commendable position over peers.

T. Rowe Price’s shares have gained 18.8% over the last six months compared with 26.1% growth registered by the industry.

Some other finance stocks which raised their dividends during the current quarter are Bank OZK OZK and Washington Federal WAFD. Bank OZK raised its quarterly dividend by nearly 1%, while Wintrust Financial increased by 4.5%. Capital One COF restored its quarterly dividend to pre-COVID-19 levels.

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Zacks Investment Research