We continue to recommend investors diversify their Finance sector holdings with non-bank stocks. Here’s one that dominates its niche market, which helps cut your risk. What’s more, it’s incorporating artificial intelligence (AI) technology to improve its product and services performance. That should spur growth for years to come.
That’s because this investment management leader offers a compelling combination of current income and growth potential from strong demographic tailwinds from retiring baby boomers.
With a 10.3% five-year dividend growth rate and expanding international presence, the stock trades at 13.2 times the company’s forward earnings forecast.
T. ROWE PRICE GROUP INC. (Nasdaq symbol TROW; www.troweprice.com) has its fee income rise and fall with the value of the mutual funds and other securities it manages.
The company’s fee income rises with the value of the mutual funds and other securities it manages. Thanks to the strong stock market, T. Rowe Price had $1.63 trillion in assets under management as of September 30, 2024, up 12.4% from $1.45 billion at the start of the year. Investors outside the U.S. account for roughly 9% of the company’s assets under management.
Thanks to the strong stock market and rising assets under management, the company’s revenue in the third quarter ended September 30, 2024, rose 6.9%, to $1.79 billion from $1.67 billion a year earlier.
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Despite higher costs—for payroll, advertising, and new technology—earnings before unusual items rose 17.4%, to $586.5 million from $499.5 million. Due to fewer shares outstanding, earnings per share rose 18.4%, to $2.57 from $2.17.
Dividend Stocks: T. Rowe Price’s 38-year dividend growth streak at good valuation
The company’s long-term prospects remain bright, particularly as more baby boomers retire over the next few years. A new plan to cut 2% of its workforce and consolidate office space should also improve profitability.
The company should earn $9.42 a share in 2025. It trades at a reasonable 13.2 times that earnings forecast.
T. Rowe Price last raised your quarterly dividend by 1.6% with the March 2024 payment, to $1.24 a share from $1.22. The annual rate of $4.96 yields a high 4.0%. T. Rowe Price has now increased its annual dividend payment for 38 consecutive years.
Over the past five years, that dividend rose by an average 10.3% annually. The company’s TSI Dividend Sustainability Rating is Above Average.
Recommendation in Dividend Advisor: T. Rowe Price Group Inc. is a buy.
