I continued to take advantage of the late August market correction when many stock prices took a plunge. Many of these stock prices fell, not because the fundamentals of the business had changed, but mostly because of people pulling out of the market due to concerns over China’s currency devaluation. However, as a long term investor, China’s currency valuation does not affect me; I will continue to deploy capital to strong stable businesses in order to collect dividends and generate wealth.
I purchased 15 shares of T. Rowe Price Group Inc. (TROW) on 9/9/2015 for $70.60 per share.
T. Rowe Price Group Inc. is a publicly owned asset management company that provides services to individuals, institutional investors, retirement plans, financial intermediaries and institutions. They provide a broad array of mutual funds, sub-advisory services, and sophisticated investment planning and guidance.
TROW makes money by charging fees on managing portfolio’s that include stock, bond, blended asset and money market funds. They also make money through fees collected from retirement planning advice, their discount brokerage service and trust services.
T. Rowe Price Group Inc. sports some of the most impressive fundamentals I’ve seen. Revenue in fiscal year 2005 was $1.512 billion and increased to $3.982 billion in fiscal year 2014. Double-digit top-line growth of 11.36% is not something you come across often in well established companies like TROW!
- Revenue grew by approximately 11.36% over the last 10 years.
- EPS is 4.65 and has increased by 8.69% over the last 5 years.
- Dividend yield at time of purchase was 2.95% and TROW pays a dividend of $2.08 per share. TROW has been increasing dividends for 29 years and the payout ration is currently 30.6%. This tells me there is still plenty of room for the dividend to grow at a healthy rate.
- Debt/Equity ration: None! TROW currently has no long term debt on their balance sheet.
While TROW is one of the largest and most respected “no load” mutual funds and they cater to people who do not want to actively manage their own money, they do not currently offer low index funds for people who want to save on fees and manage their money. If TROW were to offer low fee index funds, this could potentially mean sacrificing profits from the mutual fund side of the business.
- The P/E ratio is currently 15.20, which is lower than TROW’s 5 year average of 21.70 and the S&P 500 18.4.
- Morningstar valuation: $85
- S&P Capital IQ valuation: $83.10, rated a 4 star “BUY”
T. Rowe Price Group Inc. overall is an attractively valued high-quality stock, I think. They have a business model that is easy to understand, are well respected as leaders in their industry, have a clean balance sheet and have plenty of room to grow the dividend rate. A clear winner, in my book!
This purchase adds $31.20 to my annual dividend income based on the the current $0.52 quarterly dividend.
Full Disclosure: Long TROW
Thanks for reading.
Images: Death to the Stock Photo with graphics added by One Woman’s Worth.