T. Rowe Price Group (NASDAQ:TROW) Is Paying Out A Larger Dividend Than Last Year

T. Rowe Price Group, Inc. (NASDAQ:TROW) will increase its dividend on the 28th of March to $1.24, which is 1.6% higher than last year's payment from the same period of $1.22. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.

Check out our latest analysis for T. Rowe Price Group

T. Rowe Price Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 114% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to fall by 3.9% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 81% in the next 12 months, which is on the higher end of the range we would say is sustainable.

T. Rowe Price Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $1.52, compared to the most recent full-year payment of $4.88. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

T. Rowe Price Group May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Unfortunately, T. Rowe Price Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On T. Rowe Price Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think T. Rowe Price Group's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for T. Rowe Price Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.