T. Rowe Price Group, Inc.’s (TROW) board of directors approved a 16% hike in the company’s quarterly common stock dividend. The revised quarterly dividend now stands at 44 cents per share compared with the previous amount of 38 cents. The new dividend will be paid on Mar 28, 2014, to shareholders of record as of Mar 14.
This marks the 28th consecutive annual dividend increase for this investment manager, reflecting its commitment to return value to shareholders with its strong cash generation capabilities. Prior to this hike, the company had increased its dividend by 12% (from 34 cents to 38 cents per share) in Feb 2013.
We believe that despite active competition, the company has a significant long-term upside potential based on its disciplined risk-aware investment approach, which focuses on diversification, style consistency and fundamental research.
As of Dec 31, 2013, T. Rowe Price remains debt-free with substantial liquidity, including cash and sponsored portfolio investment holdings of about $3.0 billion, which supports its ability to continue investing in the future. The company had $1.23 billion in operating cash flows as of Dec 31, 2013, up 36.6% year over year.
Further, during 2013, the company repurchased 0.2 million shares of its common stock for $14.1 million and paid $396.7 million as dividends.
T. Rowe Price’s financial stability has the potential to benefit from the growth opportunities in the domestic and global assets under management. With a debt-free position, higher return on earnings and improving investor sentiment witnessed as a whole, we believe fundamentals will continue to remain strong. Moreover, the dividend increase will boost shareholders’ confidence in the company.
Currently, T. Rowe Price carries a Zacks Rank #2 (Buy). Some better-ranked investment managers worth considering include Lazard Ltd. (LAZ), Waddell & Reed Financial, Inc. (WDR) and Fortress Investment Group LLC (FIG). All these stocks carry a Zacks Rank #1 (Strong Buy).
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