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Is T. Rowe Price Dividend Growth (PRDGX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Large Cap Blend funds, a place to start could be T. Rowe Price Dividend Growth (PRDGX - Free Report) . PRDGX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PRDGX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a " buy and hold " mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRDGX. T. Rowe Price Dividend Growth made its debut in December of 1992, and since then, PRDGX has accumulated about $10.26 billion in assets, per the most up-to-date date available. The fund's current manager, Thomas J. Huber, has been in charge of the fund since March of 2000.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 14.82%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 11.15%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, PRDGX's standard deviation comes in at 16.32%, compared to the category average of 16.51%. The fund's standard deviation over the past 5 years is 13.17% compared to the category average of 13.79%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.85, which means it is hypothetically less volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. With a positive alpha of 0.78, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.

The mutual fund currently has 85.21% of its holdings in stocks, and these companies have an average market capitalization of $210.15 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Industrial Cyclical
  3. Finance
  4. Non-Durable
This fund's turnover is about 14.6%, so the fund managers are making fewer trades than its comparable peers.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PRDGX is a no load fund. It has an expense ratio of 0.63% compared to the category average of 0.97%. From a cost perspective, PRDGX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.

Bottom Line

Overall, T. Rowe Price Dividend Growth ( PRDGX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


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