Plain Dividend Yield’s For Chumps: Growth in Payout Wins – T. Rowe Price’s 16% Yearly Gain

Mutual fund and 401(k) asset manager T. Rowe Price (TROW) has posted 16% annualized dividend growth over the past 5 years, ranking it as the 9th best dividend booster among the S&P 500 Dividend Aristocrats. That it managed to increase its dividend through the financial crisis and its wake is a rare feat among the financial sector.

This is part of series on the 10 S&P 500 Dividend Aristocrats with the highest dividend growth.

T. Rowe benefits from very sticky money, around 60% of the $574 billion in assets it managed at the end of the third quarter was in retirement accounts. Still, the mutual fund business has been ceding market share to the more cost-effective exchange-traded-fund platform for years, a trend that has accelerated in the wake of the financial crisis when fees have gotten more attention. Over the 12 months through September, T. Rowe Price AUM (assets under management) grew 17%. Blackrock’s (BLK) iShares ETF unit had a 28% in AUM over the same 12-month stretch. iShares has the largest market share among ETF providers.

T. Rowe has had a strong earnings recovery since the crisis, but it’s nothing like the ETF juggernaut’s.


TROW EBIT TTM data by YCharts

Earlier this month T. Rowe Price won SEC approval to offer actively-managed ETFs. But there remain some challenges to work through. It’s likely that T. Rowe’s stable of astute stock pickers aren’t exactly chomping at the bit to have their trades divulged daily. That’s a requirement of all ETFs. Mutual funds just have to report holdings on a quarterly basis.

For dividend seekers, T. Rowe Price is an interesting candidate. Being an aristocrat speaks volumes, as does the strong five-year growth trend. But this is not nirvana for current income, as the stock has a current dividend yield hugging 2%. What you’re buying is that dividend growth from a steady-eddy that has plenty of room to keep raising the payout. (In fact, T. Rowe paid out a special $1.00 per share dividend in December).

TROW Cash Div. Payout Ratio TTM Chart

TROW Cash Div. Payout Ratio TTM data by YCharts

But the stock is not on sale. The 21.25 PE ratio is in the vicinity of where the stock has traded for more than decade, excluding a spike during the financial crisis.

Carla Fried, a senior contributing editor at, has covered investing for more than 25 years. Her work appears in The New York Times, and Money Magazine. She can be reached at



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