We recently compiled a list of the 10 Undervalued Dividend Aristocrats To Buy According to Hedge Funds. In this article, we are going to take a look at where T. Rowe Price Group, Inc. (NASDAQ:TROW) stands against the other undervalued dividend aristocrats to buy according to hedge funds.
A dividend aristocrat is an S&P 500 company that not only maintains regular dividend payments to shareholders but also increases its payouts annually. To qualify as a dividend aristocrat, a company must raise its dividends consistently for at least 25 consecutive years.
Michael Clarfeld, Portfolio Manager at ClearBridge, recently talked about why companies that consistently grow their dividends are well-positioned to handle the challenges of 2025. With rising costs, tighter margins, higher interest rates, and inflation on the horizon, Clarfeld is still optimistic about the economy. He pointed to strong employment numbers, upbeat consumer sentiment, and confident businesses, especially after the election. Pro-business policies under the Trump administration could drive investments and growth, which sounds great, but there’s a catch. For instance, bringing manufacturing back to the US would create jobs and boost wages, but it could also increase business costs. After two strong years, Clarfeld doesn’t see much room for big capital gains in 2025. Plus, with inflation sticking around, the Federal Reserve is likely to take a more cautious approach. That said, he sees opportunities in sectors like European and global consumer staples and US energy infrastructure.
Clarfeld is a big fan of dividend growth stocks, calling them a timeless investment. They can act as a safety net during volatile markets and provide steady income, which is especially useful when capital appreciation feels out of reach. He also highlighted how dividends help protect your purchasing power by keeping up with inflation. In his view, dividend growth is a smart and reliable strategy for navigating a potentially bumpy 2025.
Paul Baiocchi of SS&C ALPS Advisors sees dividend investing as a smart move, expecting the Fed to ease rates. According to Baiocchi, investors are shifting from money markets and fixed income to dividend-paying stocks, especially companies with leverage that could benefit from lower interest rates. Similarly, Mike Akins of ETF Action also sees dividend ETFs as a defensive play, highlighting that the companies included typically have strong balance sheets. He notes the growing popularity of dividend-focused ETFs, suggesting that consistent dividends give investors confidence in a company’s stability and financial health. Both experts agree that dividends offer a sense of durability and drawdown protection in uncertain markets.
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Our Methodology
In this article, we selected stocks from the Dividend Aristocrats List that had a P/E ratio below 20 as of December 23. Our focus was on identifying stocks with the strongest hedge fund sentiment in Q3 2024 among the 66 Dividend Aristocrats that also met our P/E criteria. The stocks are ranked below in ascending order based on the number of hedge fund holders for each company.
At Insider Monkey, we are obsessed with 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).
T. Rowe Price Group, Inc. (NASDAQ:TROW)
Dividend Yield as of December 23: 4.27%
Number of Hedge Fund Holders: 26
P/E Ratio: 12.72
T. Rowe Price Group, Inc. (NASDAQ:TROW) is a global investment management firm that works with individuals, institutions, retirement plans, and financial advisors. They manage equity and fixed-income mutual funds, investing in markets worldwide. Founded in 1937 in Baltimore, Maryland, T. Rowe Price Group, Inc. (NASDAQ:TROW) has grown into a worldwide presence, with offices across the United States, Europe, Asia, Australia, and the Middle East. TROW ranks 9th on our list of the best dividend aristocrat stocks list, with a history of raising its dividends for the last 38 years.
T. Rowe Price Group, Inc. (NASDAQ:TROW) had a solid third quarter, ending with $1.63 trillion in assets under management (AUM), which is a 3.9% increase since June. This growth is impressive, especially considering $12.2 billion in net outflows during the same period. While those outflows were disappointing, there are plenty of reasons to be optimistic.
T. Rowe Price Group, Inc. (NASDAQ:TROW) is making strides in alternative investments. Their senior private lending fund saw its first close this quarter, contributing to a $3 billion increase in unfunded capital commitments. On the financial side, the company delivered strong results as well. Adjusted net revenue rose 7% year-over-year to $1.8 billion, and operating income jumped 13%. Adjusted earnings per share (EPS) came in at $2.57, an 18% increase from the same time last year. T. Rowe Price Group, Inc. (NASDAQ:TROW) is committed to returning value to shareholders, with over $1.1 billion returned through dividends and share buybacks so far this year.
That said, there are challenges on the horizon. A large variable annuity (VA) termination expected in Q4 will lead to higher outflows for the year, but T. Rowe Price Group, Inc. (NASDAQ:TROW) remains optimistic. The company expects 2024 outflows to be less than half of 2023 levels, even with this setback.
Insider Monkey’s Q3 data suggested that T. Rowe Price Group, Inc. (NASDAQ:TROW) was part of 26 hedge fund portfolios, compared to 28 in the earlier quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 1.86 million shares valued at roughly $203 million.
Overall, TROW ranks 9th on our list of the undervalued dividend aristocrats to buy according to hedge funds. While we acknowledge the potential of TROW to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TROW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
