T. Rowe Price Group, Inc.’s (TROW - Analyst Report) board of directors approved a 15.0% hike in the company’s quarterly common stock dividend on Thursday. The revised quarterly dividend now stands at 31 cents per share compared with the previous amount of 27 cents. The revised dividend will be payable on March 29, to shareholders as of the close of business on March 15.
This marks T. Rowe’s 25th consecutive annual dividend increase, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities. Prior to this revision, the company increased its dividend by 8% (from 25 cents to 27 cents per share) in February 2010.
Based in Baltimore, T. Rowe Price is a global investment management organization with $482.0 billion in assets under management (AUM) as of December 31, 2010. The organization provides a broad array of mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans and financial intermediaries. The company also offers refined investment planning and guidance tools.
We believe that despite active competition in markets, the company has a significant long-term upside potential based on its disciplined risk-aware investment approach which focuses on diversification, style consistency and fundamental research.
As of December 31, 2010, T. Rowe Price remains debt-free with substantial liquidity, including cash and mutual fund investment holdings of about $1.5 billion, which supports the company’s ability to continue investing for the future periods.
In 2010, the company paid roughly $278.9 million in dividends to common shareholders. Cash and cash equivalents exiting the year were $813.1 million. The company had $732.8 million in operating cash flows compared with $535.6 million as of December 31, 2009.
T. Rowe Price’s fourth-quarter 2010 earnings of 72 cents per share were significantly up from 57 cents reported in the prior-year quarter. Higher-than-expected results and better AUM were partially offset by increase operating expenses. Earnings for the quarter also surpassed the Zacks Consensus Estimate of 69 cents.
Based on its current strategic projects and plans, T. Rowe Price expects capital expenditures for fiscal 2011 to be approximately $120 million for property and equipment additions. The company anticipates funding these cash expenditures from internal resources.
Nevertheless, fundamentals remain strong with a debt-free position, higher return on earnings and improving investor sentiment. Further, relative mutual fund performance was also positive and we believe that in the long run, the company’s financial stability has the potential to take advantage of the gaining traction in the economy and benefit from the growth opportunities in the domestic and global AUM.
Moreover, the dividend increase reflects T. Rowe Price’s strong cash position and shareholders’ value to the company.
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