T. Rowe Price Group Inc. (TROW). Below are some highlights from the above linked analysis:
Company Description: T. Rowe Price Group Inc. (formerly T. Rowe Price Associates) operates one of the largest no-load mutual fund and life cycle fund complexes in the United States.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
TROW is trading at a discount to only 3.) above. The stock is trading at a 6.0% discount to its calculated fair value of $84.28. TROW earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
TROW earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. TROW earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1986 and has increased its dividend payments for 27 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
TROW earned a Star in this section for its NPV MMA Diff. of the $1,192. This amount is in excess of the $800 target I look for in a stock that has increased dividends as long as TROW has. If TROW grows its dividend at 10.9% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.08%. TROW earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.
Memberships and Peers: TROW is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The Federated Investors (FII) with a 3.5% yield, Eaton Vance (EV) with a 2.5% yield and BlackRock Inc. (BLK) with a 2.5% yield.
Conclusion: TROW earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks TROW as a 5-Star Very Strong stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $92.11 before TROW's NPV MMA Differential decreased to the $800 minimum that I look for in a stock with 27 years of consecutive dividend increases. At that price the stock would yield 1.9%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $800 NPV MMA Differential, the calculated rate is 9.5%. This dividend growth rate is below the 10.9% used in this analysis, thus providing a small margin of safety. TROW has a risk rating of 1.00 which classifies it as a Low risk stock.
With a well-respected brand and a strong market share, TROW is well-positioned as an asset manager. It consistently produces net client inflows based on the relative performance of its funds. TROW's target-date retirement funds should continue to be an attractive option with baby boomers now that they have reached retirement age.
TROW is focused on revenue growth with net revenues increasing 16.1% year over year in first-half 2014. This trend should continue going forward. TROW is an attractive investment for yield-conscience investors. In Feb 2014, the company’s increased its quarterly divided 16.0%. This marks the 28th consecutive annual dividend increase. In addition, in first-half 2014, the company repurchased $57 million of its common stock.
The company has been able to generate more stable results than its peers with significant invested assets in retirement accounts and variable-annuities. This focus provides a much more stable investment base with lower turnover. With no debt, higher return on earnings and improving investor sentiment, the company is strong contender within its industry. The stock is currently trading near its calculated fair value of $84.28. I am watching this stock closely for an opportune time to buy.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in TROW (0.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.
- IBM: Trading At A Discount And Double-Digit Dividend Growth
- CVS Health Corporation: Trading Below Fair Value And Strong Dividend Growth
- Lockheed Martin Corp. Priced To Buy
- Dividend Stock Analysis: McDonald's Corporation, One To Watch Closely
- Dividend Stock Analysis: Is It Time To Buy ConocoPhillips?
- More Stock Analysis
Tags: [TROW] [FII] [EV] [BLK]
Popular Posts - Last 7 days
Over time stocks fall in and out of favor with the media, analysts and investors. It is too easy to fall in love with a stock only to have ...
Life often deals us difficult circumstances to work through at what seems to be the most inopportune time. During economic downturns, many ...
Linked here is a detailed quantitative analysis of Genuine Parts Company (GPC). Below are some highlights from the above linked analysis: ...
Linked here is a detailed quantitative analysis of Nike, Inc. (NKE). Below are some highlights from the above linked analysis: Company De...
Presented below are are my Dividend Growth Stocks portfolio holdings. This is not a recommendation to buy these securities. I have classifi...
Linked here is a detailed quantitative analysis of Colgate-Palmolive (CL). Below are some highlights from the above linked analysis: Comp...
Each Sunday I highlight any notable articles that I came across over the past week. Though I may not always agree with each of the articles ...
Linked here is a detailed quantitative analysis of Johnson & Johnson (JNJ). Below are some highlights from the above linked analysis: ...
Commitment is a word often thrown around, but rarely backed up with actions. Salesmen are committed to your needs until you sign on the dott...
Linked here is a detailed quantitative analysis of Realty Income Corp. (O). Below are some highlights from the above linked analysis: Com...