We recently compiled a list of the Dividend Aristocrats Ranked By Yield: Top 10. In this article, we are going to take a look at where T. Rowe Price Group, Inc. (NASDAQ:TROW) stands against the other dividend aristocrats.
Investors have always put income at the top of their list. And when it comes to raking in money, you can’t beat dividend stocks. Research by S&P Dow Jones Indices has demonstrated that over the long haul, dividend-paying companies have outperformed non-dividend companies and the broader market on a risk-adjusted basis. Though investing in high dividend yields is not advised by analysts, recent research indicates that dividend yield is a risk factor that pays off, historically earnings higher returns than a market-cap-weighted benchmark. When paired with other factors like volatility, quality, momentum, size, and value, dividend yield strategies can potentially tap into systematic sources of returns.
Dividend yield and dividend growth have always been a hot topic among investors. But little did they realize that dividend yield is a key piece of the puzzle when it comes to dividend growth. When it comes to the Dividend Aristocrats Index, the knack for increasing dividends for 25 straight years doesn’t mean sacrificing yield. The index has consistently outshone its benchmark by delivering higher yields, typically between 2% and 2.9% over the past 26 years ending 2023. On average, the index’s yield was 2.5%, compared to the market’s 1.8%. To read more about high dividend stocks, have a look at Best Dividend Stocks Yielding at Least 7% According to Hedge Funds.
In addition to offering solid yields, dividend aristocrats are also less volatile than other asset classes. According to a report by S&P Dow Jones Indices, the Dividend Aristocrats Index has outpaced the broader market over the long haul with less volatility, which is indicated by its higher risk-adjusted returns. The index’s ability to provide downside protection is evident in its upside and downside capture ratio. These stocks have outperformed the market in 69.34% of down months and 43.61% of up months. Moreover, the Dividend Aristocrats Index has experienced lower drawdowns compared to the benchmark index. The report further mentioned that the index delivered an average excess return of 1.05% during down months compared to the broad-based benchmark.
Data from 2023 highlights how eager companies are to boost their dividends. This isn’t just a knee-jerk move to lure investors; it’s backed by robust corporate balance sheets, with companies raking in more cash flows than ever before. According to Janus Henderson, corporate cash flow remained strong in 2023 across most sectors, giving companies ample resources for dividends and share buybacks. As a result, global dividend growth saw a 5% increase for the year, aligning with the long-term trend. The firm also gave a positive outlook for dividends in 2024. It said that dividends appear solidly supported this year, although one-time special dividends are expected to decrease from the record levels observed over the past three years. The firm’s forecast predicts $1.72 trillion in dividends for 2024, marking a 3.9% increase on a headline basis, which translates to a 5% growth rate on a headline basis.
There are many dividend aristocrats that offer solid yields to shareholders. In this article, we will take a look at some of the best dividend aristocrat stocks with high yields.
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 the highest dividend yields as of June 25 and arranged them in order from lowest to highest yield. We also measured hedge fund sentiment around each stock according to 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 June 25: 4.20%
T. Rowe Price Group, Inc. (NASDAQ:TROW) is an American asset management company that provides a wide range of advisory services to its consumers. In May, the company reported a growth in its assets under management (AUM) to $1.54 trillion, from $1.49 trillion as of April end. According to the management, favorable market conditions led to an increase in AUM. However, in the first quarter of 2024, the company reported net outflows of $8 billion, which were about half the level seen during the same period last year. The company said that while the outflows are expected to continue in the second half of 2024 as well, there is optimism for improvement this year due to higher sales and lower redemptions.
T. Rowe Price Group, Inc. (NASDAQ:TROW)’s business model presents both benefits and risks. As an asset manager, the company generates revenue by investing clients’ funds, with earnings fluctuating due to client inflows and outflows and market volatility. Hence, its earnings can be as unpredictable as the market itself. However, with no long-term debt on its balance sheet and a debt/equity ratio of just 0.03, the company has a significant financial cushion, ensuring dividend stability throughout the market cycles.
T. Rowe Price Group, Inc. (NASDAQ:TROW) offers a quarterly dividend of $1.24 per share and carries a dividend yield of 4.20%. The company has raised its payouts for 38 consecutive years, which makes TROW one of the best dividend aristocrat stocks on our list. In the most recent quarter, it returned $365 million to shareholders through dividends and share repurchases.
T. Rowe Price Group, Inc. (NASDAQ:TROW) was included in 24 hedge fund portfolios at the end of Q1 2024, according to Insider Monkey’s database. The stakes held by these hedge funds have a total value of over $938 million.
While we acknowledge the potential of TROW as an investment, our conviction lies in the belief that 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 as promising as 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.
Overall TROW ranks 6th on our list of the best dividend aristocrats ranked by yield. You can visit Dividend Aristocrats Ranked By Yield: Top 10 to see the other dividend stocks 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.
