Key Points in This Article:
T. Rowe Price‘s (TROW) Dividend Aristocrat status ensures reliable income, backed by strong cash flow and no debt.
Despite ongoing net outflows and stiff competition, TROW’s active management and new product offerings signal growth potential.
A discounted price and recent stock rebound offer value, though macro risks and industry trends warrant caution.
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A Discounted Dividend Aristocrat Worth Buying
Dividend Aristocrats embody the sort of stability and reliability that income-focused investors seek. They are stocks in the S&P 500 that have at least 25 consecutive years of dividend increases. That’s not enough to make them a buy, but it is a good starting point to find bargains hiding in the shadows.
T. Rowe Price Group (NASDAQ:TROW) is one such member of the dividend aristocracy. The investment management firm was founded in 1937 and currently boasts a 5% dividend yield
With $1.62 trillion in assets under management (AUM) as of May 31, TROW has evolved from a small advisory firm into a global leader in active management, specializing in retirement and growth-oriented funds.
Despite recent challenges, its high yield and undervaluation signal a compelling opportunity for investors to get in while it is still cheap.
Down 20%, but On Its Way Back
T. Rowe Price’s stock is trading approximately 20% below its 52-week high of around $126 per share, reflecting market pressures that have weighed on its valuation. The primary driver is 13 consecutive quarters of net AUM outflows through the first quarter of 2025, totaling tens of billions of dollars, as investors shifted toward passive funds and competitors like BlackRock (NYSE:BLK).
This outflow trend, coupled with a 11.6% year-to-date stock decline, underperforming the S&P 500’s 5.8% gain, has dented investor confidence. Higher operating expenses and $1.2 million in negative capital allocation-based income (and $5.2 million in Q4) further strained margins, while declining fee rates in a competitive industry added pressure.
Macroeconomic headwinds, such as potential trade wars and inflation highlighted in TROW’s 2025 Midyear Outlook, have also raised concerns about AUM growth in volatile global markets.
However, TROW has rebounded 28% from its 52-week low of approximately $78 per share, signaling a recovery driven by renewed investor interest.
This bounce reflects optimism about TROW’s strategic moves, including the launch of two international equity ETFs last month — the T. Rowe Price Global Equity ETF (NYSEARCA:TGLB) and T. Rowe Price International Equity Research ETF (NYSEARCA:TIER) — which diversifies its offerings and taps into growing demand for active ETFs.
Additionally, analyst upgrades, with 2025 earnings projections at $8.31 per share (up slightly from prior estimates of $8.26 per share), suggest improving fundamentals. TROW trades at just 11 times trailing earnings and next year’s estimates, which is below the industry average of 12.2X. This indicates it remains undervalued and attracts value investors seeking high-yield opportunities.
Why Buy TROW Now
Despite not being risk-free, TROW is a compelling buy for several reasons. Its 5% dividend yield, backed by 38 years of consecutive increases, offers a reliable income stream, far exceeding the S&P 500’s average yield of 1.3%.
The investment management firm’s debt-free balance sheet and consistent cash flow generation ensure dividend sustainability, even amid outflows. TROW’s focus on active management and leveraging its proprietary research positions it to capitalize on market environments favoring stock-picking, particularly in value stocks and emerging markets, as it noted in its 2025 outlook.
With two-thirds of its AUM tied to retirement accounts, TROW is well-placed to benefit from the growing demand for retirement solutions as populations age.
The stock’s 20% discount, combined with the recovery from its lows, suggests TROW has bottomed out, making today’s price an attractive entry point. These strategic initiatives, such as expanding its ETF offerings and targeting institutional clients, signal that the company can adapt in a shifting industry.
Key Takeaways
While risks remain — continued outflows, fee compression, and macroeconomic uncertainties — TROW’s undervaluation offsets the downside.With Wall Street analysts revising their EPS projections higher, it underscores ongoing cautious optimism. The stock’s price-to-book ratio of 2.1X (below its five-year average of 3.2X) enhances its value proposition.
For income and value investors, TROW offers a rare blend of high yield, growth potential, and a proven track record, making this Dividend Aristocrat one worth adding to your portfolio today.
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