We recently compiled a list of the 10 Best Dividend Aristocrats with Over 3% Yield. In this article, we are going to take a look at where T. Rowe Price Group, Inc. (NASDAQ:TROW) stands against the other dividend stocks with over 3% yield.
When it comes to investing in stocks, high-growth companies often steal the spotlight. However, during uncertain times, dividend stocks—companies that regularly pay out quarterly dividends to shareholders—can serve as safe havens, helping to build wealth regardless of market conditions. Historically, dividends have played a significant role in stock market gains. Since 1930, dividends have contributed about 40% of the S&P 500’s total returns. When it comes to dividend stocks, companies that consistently increase their dividends hold special importance for investors. These companies provide shareholders with a steadily growing income.
One popular dividend strategy to invest in dividend growth stocks is dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years. Though the dividend aristocrats index is lagging this year, delivering a little over 5% return year-to-date, it has performed well in the long run, especially during market downturns. Phillip Brzenk, S&P’s global head of multi-asset indexes, studied the performance of dividend growth strategies, focusing on times when the market performed negatively. He discovered that since the end of 1989, there have been six years when the broader market experienced negative returns. In each of those years, the Dividend Aristocrats index outperformed the benchmark by an average of 13.28%. Notably, the Dividend Aristocrats even achieved a positive total return in three of those years.
Given the strong returns of dividend growth stocks, numerous companies are keen to enhance their dividends. In the second quarter of 2024, there were 539 dividend increases, a 17.2% rise from the 460 increases in the same quarter of 2023. The total dividend hikes amounted to $20.4 billion for the quarter, significantly up from $9.8 billion in Q2 2023, according to a report by S&P Dow Jones Indices. These dividend increases aren’t just a quick fix to attract investors; it’s supported by strong corporate balance sheets and increased cash flows. According to Janus Henderson, corporate cash flow remained solid across most sectors in 2023, providing ample resources for dividends and share buybacks. Consequently, global dividend growth increased by 5% for the year, following the long-term trend. The firm also gave an optimistic outlook for dividends in 2024, predicting $1.72 trillion in dividends for the year, marking a 3.9% increase on a headline basis, equivalent to a 5% growth rate.
Dividend aristocrat stocks are renowned for their growing income, but that doesn’t mean they lack solid yields. Many dividend aristocrats provide above-average yields along with decades of consistent dividend growth. This combination is particularly advantageous for income investors, as it offers the best of both worlds: robust yields and steady growth. Let’s now take a look at some of the best dividend aristocrat stocks with over 3% yield.
Our Methodology:
For this list, we looked at a group of 67 dividend aristocrat companies, which are known for raising dividends for 25 years or more. From this list, we chose 10 stocks with dividend yields above 3%, as of July 17, and arranged them in order from lowest to highest yield. We’ve also mentioned the hedge fund sentiment for each stock, which was sourced from Insider Monkey’s database of 920 funds as of Q1 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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T. Rowe Price Group, Inc. (NASDAQ:TROW)
Dividend Yield as of July 17: 4.15%
T. Rowe Price Group, Inc. (NASDAQ:TROW) is an American asset management company that offers a wide range of related services to institutions, individuals, and financial intermediaries. The company’s assets under management grew to $1.57 trillion at the end of June 2024, from $1.54 trillion at the end of May. According to the company’s management, favorable market conditions contributed to the growth of AUM. That said, the company also reported net outflows of $3.7 billion for the second quarter of 2024. The company indicated that while outflows are anticipated to persist through the second half of 2024, there is optimism for improvement this year due to increased sales and reduced redemptions.
T. Rowe Price Group, Inc. (NASDAQ:TROW) is a reliable option from a dividend point of view. The company’s balance sheet is strong with over $2.4 billion available in cash and cash equivalents at the end of March 2024, up from $2.06 billion in the previous quarter. That said, the company operates as an asset manager, deriving revenue from investing client funds. This business model exposes it to fluctuations in earnings driven by client inflows, outflows, and market volatility, making its earnings as unpredictable as the market itself. Despite these challenges, the company maintains a robust financial position with no long-term debt and a low debt/equity ratio of 0.03. This financial strength provides a substantial cushion, ensuring dividend stability even through market cycles.
In the first quarter of 2024, T. Rowe Price Group, Inc. (NASDAQ:TROW) returned $365 million to shareholders through dividends and share repurchases. The company offers a quarterly dividend of $1.24 per share and has a dividend yield of 4.15%, as of July 17. It has been raising its payouts consistently for the past 38 years, which makes TROW one of the best dividend aristocrat stocks on our list.
T. Rowe Price Group, Inc. (NASDAQ:TROW) was included in 24 hedge fund portfolios at the end of Q1 2024, down from 32 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a collective value of over $938 million.
Overall TROW ranks 6th on our list of the best dividend aristocrats to buy. You can visit 10 Best Dividend Aristocrats with Over 3% Yield to see the other dividend aristocrats that are on hedge funds’ radar. While we acknowledge the potential of TROW as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than TROW but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.