The FiveTwenty portfolio received no dividends in the past week.
|Past Week Dividend||$0|
|Current Quarter Dividend||$0|
|Estimated Annual Dividend||$552.55|
The capital allocation for the week of 02/21/2021 to 02/27/2021 will be used to establish a position in T. Row Price Group (NASDAQ: TROW).
TROW – Company Profile
T. Row Price Group (TROW) is a publicly owned investment manager. The firm offers mutual funds, advisory services, account management, and retirement plans and services for individuals, institutions, and financial intermediaries. As of January 31, 2021 TROW had $1.46 trillion in assets under management. Official Site | Wikipedia
|Dividend Streak||35 years|
|Yield||2.21% (TTM) / 2.65% (MRD)|
Does TROW have the financial means to sustain and raise its dividend going forward?
TROW derives around 91% of its revenue from advisory fees. This in turn makes the companies revenues closely coupled with the size of the assets under management. Any downturns in the financial markets would very likely lead to lower investment advisory fees and a corresponding decline in revenues.
Over the last 10 years, TROW showed an ability to consistently grow its revenue and net income.
The consistency, TROW showed in growing its top line revenue has also translated into increasing EPS over the last decade. Furthermore, the company has maintained a payout ration of between 35% and 46% over the last 10 years (source GuruFocus).
For 2020, TROW has been able to maintain its strong performance despite the COVID-19 pandemic. For the year revenue, net income and EPS increased by 10.5%, 11.3%, and 14.7% compared to the previous year. At the same time, assets under management grew from $1.21 trillion to $1.47 trillion during the year.
Are we paying too much for TROW at the current share price?
In the last 10 years, TROW’s P/E ratio saw a low of 11.25 and a high of 29, with a median value of 17.85. (per GuruFocus) The current TTM P/E ratio of 16.24 is slightly below the median value.
The current stock price of $162.77 is 4.7% above the 50-day moving average and 18.2% above the 200-day moving average. Additionally, the stock price is near the top of the 52 week trading range as well as its all time high.
The share price has performed well since hitting a bottom in March 2020. However, so has the underlying business. At the same time, the PE multiple has stayed in line with historical values.
How does the current dividend yield for TROW compare to historical values?
Over the last decade, the dividend yield for TROW has been in a range of 1.52% to 3.52%, with a median of 2.24%. (per GuruFocus) The current TTM yield of 2.21% is more or less at the median value.
However, for Q1 2021 the company announced an increase of the quarterly dividend to $1.08/share from the previous $0.90/share. This is a 20% increase of the dividend. Additionally, the increase brings the forward looking yield up to 2.65%.
Why are we adding TROW to the FiveTwenty portfolio?
TROW has delivered a streak of 35 consecutive years of dividend increases. As per GuruFocus TROW had a median 3-year average dividend growth rate of 12.30% per year over the past decade. Additionally, TROW has shown an impressive ability to consistently grow its revenue and net earnings. Per GuruFocus the median EPS growth rate during the past 10 years was 14% as well. We believe that TROW will be able to continue this strong performance, which makes it a strong dividend stock with a compelling future growth story.
The current TTM yield of 2.21% is below the minimum specified in our entry criteria. However, the yield of 2.65% following the latest announced dividend increase is above our minimum entry criteria.
- TROW 2021-01-29 (suredividend.com)
- Dividend Aristocrats In Focus Part 16: T. Rowe Price – Sure Dividend
- T. Rowe Price Group Remains Attractively Priced (NASDAQ:TROW) | Seeking Alpha
Featured Photo by Kazden Cattapan on Unsplash