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This Beaten-Down Dividend Stock Is Still a Buy


Technology companies are not the only ones to feel the sting from the recent market sell-off. It’s impacted other industries, as well, including asset managers. 

Asset managers perform well during rising stock markets, but when markets fall, their assets drop with it. Also, they typically get hit with outflows as investors pull their money out or move it around. Both of these reactions hurt revenue.

So it may not come as a shock that one of the leading asset managers, T. Rowe Price ( TROW 0.04% ), has had a rocky year so far, given the market environment. The stock is down about 27% year to date as of Feb. 17 and roughly 35% since early November. But there are a few good reasons this stock — known for its terrific dividend — remains a good investment.

Rocky markets rock T. Rowe Price

T. Rowe Price is one of the largest asset managers in the U.S. and considered one of the top active managers. Over the past 10 years, it’s gained market share and churned out double-digit annual revenue increases, buoyed by a long bull market and superior performance that largely outperformed the benchmarks.

Last year was another strong year, as the stock price finished up 30%, but it plummeted from a high of $224 per share on Nov. 5 to close the year at $196. As of Feb. 17, it was trading at about $144 per share.

A person looking over financial documents at the kitchen table.

Image source: Getty Images.

The mixed bag for T. Rowe Price in the fourth quarter reflected the volatility of the market. Assets under management were up 15% to $1.69 trillion in the quarter, lifted by market appreciation and the acquisition of alternative investment-manager Oak Hill Advisors, which brought in $57 billion in assets. But those gains were offset by net outflows of $22.7 billion in the quarter, as there was an elevated number of stock-fund redemptions and transfers into other asset classes and less risky portfolios.

Overall, the company has about half of its assets in separate accounts/subadvised assets and half in mutual funds. It also has about 60% of its assets in equity funds/portfolios and 40% in fixed income, multi-asset, and alternative investments.

Assets dropped in January, with market losses and client outflows and transfers the chief culprits. Assets under management fell 6.5% to $1.58 trillion, compared to the year-end number. Equity mutual fund assets dropped 9.2% to $503 billion, while equity separate account/subadvised assets decreased 9.1% to $399 billion. This was related to the overall decline in the stock market.

A Dividend Aristocrat raises its dividend again

Shareholders mirroring T. Rowe Price’s clients shifted out of the stock during the January market downturn. But the stock price has leveled off in February and should start moving back up as the market slowly recovers.

But 2022 will be a challenging year. The company expects net inflows in 2022 (as opposed to outflows), but its growth may be below its 1% to 3% target. Combine that with a stock market that likely won’t be seeing…


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