Asset managers, like T. Rowe Price (TROW), have struggled because of lower assets under management (AUM), compressing fees, and net outflows. Investors have generally gravitated to passively managed index funds or ETFs. But T. Rowe Price is probably a survivor because its mutual funds perform relatively well with reasonable expense ratios.
The firm is a leading player in retirement accounts with its many mutual funds and target date funds for 401(k) and Individual Retirement Account (IRA) plans. Also, T. Rowe Price recently started offering ETFs. At the end of Q2 2023, AUM was approximately $1.4 trillion.
Total revenue was $6,488.4 million in 2022 and $6,260.2 million in the past twelve months.
According to Stock Rover*, the stock price has gained +8.4% year-to-date and (-4.8%) in the past year after adjusting for dividends return. For perspective, the S&P 500 Index is up +17.5% YTD and +9.5% in the past twelve months.
T. Rowe Price is well-known as a Dividend Aristocrat returning cash to shareholders. The firm has paid a growing dividend for 37 years and buys back shares. The forward dividend yield is 4.22% higher than the 5-year average. The last quarterly dividend increase was to $1.22 per share earlier this year. The 5-year dividend growth rate was over 16%. Also, the dividend is safe with a ~60% coverage ratio and an 'A' dividend equality grade. Moreover, the firm carries no debt, adding to the safety.
Source: Portfolio Insight*
The stock is undervalued based on dividend yield but fairly valued on the price-to-earnings (P/E) ratio. The blended fair value estimate is $146.55, meaning the stock is undervalued. In addition, the yield is attractive. We view this stock as a long-term buy.
Source: Portfolio Insight*
Disclosure: Long TROW
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.