T. Rowe Price: Trusted Returns

06/29/2017 2:54 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

Few financial companies are more deserving of their customers’ and investors’ trust than T. Rowe Price (TROW), the large Baltimore-based mutual-fund company, notes growth and income expert Ian Wyatt, editor of High Yield Wealth

T. Rowe Price has existed since 1937; it has existed as a publicly traded company since 1986. T. Rowe Price has paid a dividend every year since it went public. The dividend has been increased every one of those years.  

Earnings growth is driven by growth in assets under management (AUM). Drawing in new money to invest is one means of growing AUM.

Generating exceptional returns on the money already invested is another. T. Rowe Price has a long history of generating superior returns in the funds it manages compared to other mutual-fund companies. 

Eighty-four percent of T. Rowe Price’s mutual funds have outperformed their Lipper averages (a benchmark) on total return over three years, 80% over the past five years, and 86% over the past 10 years.

With only 6% of assets derived from customers domiciled outside of the United States, international growth is key to T. Rowe Price generating organic growth. We see T. Rowe Price expanding globally. New offices have been opened in Sweden, Australia, and Dubai. 

So far, so good. Over the past 12 months, the retail funds offered to foreign investors have inflowed at an average rate of $150 million a month.

As for the company in total, net inflows were up $700 million in the first quarter. We expect management to achieve its target of 1%-3% of annual organic growth.

Investors get an immediate 3.2% dividend yield in a premier dividend grower -- one with a propensity to augment dividend growth with special dividends.

What’s more, this premier dividend grower’s share trade at less than 14 times current earning; its peer group trades at more 15. 

T. Rowe Price shares trade at less than 14 times trailing 12-month earnings. The historical multiple is 18. We see nothing but value at the current share price.

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