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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 - Free Report) is a Finance stock that has seen a price change of 4.36% so far this year. Currently paying a dividend of $1.24 per share, the company has a dividend yield of 4.41%. In comparison, the Financial - Investment Management industry's yield is 2.65%, while the S&P 500's yield is 1.54%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.96 is up 1.6% from last year. In the past five-year period, T. Rowe Price has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.33%. 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. T. Rowe's current payout ratio is 58%, meaning it paid out 58% 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 $9.16 per share, which represents a year-over-year growth rate of 20.69%.
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. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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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T. Rowe Price (TROW) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 - Free Report) is a Finance stock that has seen a price change of 4.36% so far this year. Currently paying a dividend of $1.24 per share, the company has a dividend yield of 4.41%. In comparison, the Financial - Investment Management industry's yield is 2.65%, while the S&P 500's yield is 1.54%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.96 is up 1.6% from last year. In the past five-year period, T. Rowe Price has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.33%. 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. T. Rowe's current payout ratio is 58%, meaning it paid out 58% 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 $9.16 per share, which represents a year-over-year growth rate of 20.69%.
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. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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).