An In-depth Analysis of the Dividend History, Yield, and Sustainability
T. Rowe Price Group Inc(TROW, Financial) recently announced a dividend of $1.22 per share, payable on 2023-09-28, with the ex-dividend date set for 2023-09-14. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into T. Rowe Price Group Inc's dividend performance and assess its sustainability.
What Does T. Rowe Price Group Inc Do?
T. Rowe Price provides asset-management services for individual and institutional investors. It offers a broad range of no-load U.S. and international stock, hybrid, bond, and money market funds. At the end of July 2023, the firm had $1.433 trillion in managed assets, composed of equity (52%), balanced (33%), fixed-income (12%), and alternatives (3%) offerings. Approximately two thirds of the company's managed assets are held in retirement-based accounts, which provides T. Rowe Price with a somewhat stickier client base than most of its peers. The firm also manages private accounts, provides retirement planning advice, and offers discount brokerage and trust services. The company is primarily a U.S.-based asset manager, deriving just under 9% of its AUM from overseas.
A Glimpse at T. Rowe Price Group Inc's Dividend History
T. Rowe Price Group Inc has maintained a consistent dividend payment record since 1986. Dividends are currently distributed on a quarterly basis. T. Rowe Price Group Inc has increased its dividend each year since 1987. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 36 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down T. Rowe Price Group Inc's Dividend Yield and Growth
As of today, T. Rowe Price Group Inc currently has a 12-month trailing dividend yield of 4.43% and a 12-month forward dividend yield of 4.47%. This suggests an expectation of increase dividend payments over the next 12 months.
Over the past three years, T. Rowe Price Group Inc's annual dividend growth rate was 16.40%. Extended to a five-year horizon, this rate decreased to 16.00% per year. And over the past decade, T. Rowe Price Group Inc's annual dividends per share growth rate stands at an impressive 13.20%.
Based on T. Rowe Price Group Inc's dividend yield and five-year growth rate, the 5-year yield on cost of T. Rowe Price Group Inc stock as of today is approximately 9.30%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, T. Rowe Price Group Inc's dividend payout ratio is 0.72. And this may suggest that the company's dividend may not be sustainable.
T. Rowe Price Group Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks T. Rowe Price Group Inc's profitability 10 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. T. Rowe Price Group Inc's growth rank of 10 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and T. Rowe Price Group Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. T. Rowe Price Group Inc's revenue has increased by approximately 6.70% per year on average, a rate that outperforms than approximately 53.07% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, T. Rowe Price Group Inc's earnings increased by approximately -8.30% per year on average, a rate that outperforms than approximately 33.96% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 7.40%, which outperforms than approximately 48.94% of global competitors.
Next Steps
Given T. Rowe Price Group Inc's consistent dividend payments, robust dividend growth rate, and strong profitability, it presents a compelling case for dividend-focused investors. However, the company's high payout ratio raises questions about the sustainability of its dividends in the long term. Additionally, the company's impressive growth metrics suggest a positive outlook for future earnings, which could support ongoing dividend payments. As always, investors should conduct their own thorough research before making investment decisions.
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