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Why T. Rowe Price (TROW) is a Top Dividend Stock for Your Portfolio
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
T. Rowe Price in Focus
Based in Baltimore, T. Rowe Price (TROW - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 7.3%. The financial services firm is paying out a dividend of $1.24 per share at the moment, with a dividend yield of 4.29% compared to the Financial - Investment Management industry's yield of 2.76% and the S&P 500's yield of 1.58%.
Looking at dividend growth, the company's current annualized dividend of $4.96 is up 1.6% 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 11.84%. 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 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TROW for this fiscal year. The Zacks Consensus Estimate for 2024 is $8.80 per share, representing a year-over-year earnings growth rate of 15.94%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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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Why T. Rowe Price (TROW) is a Top Dividend Stock for Your Portfolio
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
T. Rowe Price in Focus
Based in Baltimore, T. Rowe Price (TROW - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 7.3%. The financial services firm is paying out a dividend of $1.24 per share at the moment, with a dividend yield of 4.29% compared to the Financial - Investment Management industry's yield of 2.76% and the S&P 500's yield of 1.58%.
Looking at dividend growth, the company's current annualized dividend of $4.96 is up 1.6% 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 11.84%. 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 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TROW for this fiscal year. The Zacks Consensus Estimate for 2024 is $8.80 per share, representing a year-over-year earnings growth rate of 15.94%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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).