Recent Buy

buyI’ve invested fresh capital in high-quality dividend growth stocks just about every single month for almost five consecutive years now and I can’t quite remember a time when I felt that value was so hard to come by. That’s not to say that attractively valued stocks are extinct, but rather that they’re a rarer breed than they were even just one year ago.

Some would prefer to just hold cash right now. But I’ve always been of the opinion that cash flow is far better than cash. After all, the major reason to be a dividend growth investor is to turn $1 into a steady stream of nickels, quarters, and eventually dollars. As such, I continue to put cash to work in order to turn it into cash flow.

Besides, nobody has any idea as to when the eventual market correction will come. I’ve been hearing for years now that it’s been a bad time to buy stocks due to a variety of concerns. If I would have held cash all that time, I would have missed out on a number of fantastic opportunities and the chance to build as much cash flow (and wealth) as I have now. Instead, I’ll be ready for cheaper stocks – when they come – with a steady flow of cash that will constantly reload my BB gun. Cash is gone once spent. Cash flow, however, tends to not only keep flowing, but growing.

With that perspective, I put fresh cash to work once more.

I purchased 20 shares of T. Rowe Price Group Inc. (TROW) on 3/3/2015 for $82.77 per share.

Overview

T. Rowe Price Group Inc. is a global investment manager that provides asset management services for institutional and individual investors.

As of December 31, 2014, the company had a record $746.8 billion in assets under management.

Approximately 64% of the company’s managed assets are held in sponsored US mutual funds. And the vast majority of the AUM are held in retirement accounts and variable-annuity portfolios.

Fundamentals

TROW sports some of the more impressive fundamentals I’ve come across, especially as it concerns growth across the top and bottom lines. However, it’s also important to remember that their AUM, and the fees they can collect, have been positively impacted by the unprecedented stock market run coming off of the financial crisis lows.

So let’s take a look and see what we’re working with here.

Revenue was $1.512 billion in fiscal year 2005. That increased to $3.982 billion in FY 2014, which is a compound annual growth rate of 11.36%. It’s not particularly often that I run across companies with double-digit top-line growth.

Earnings per share, meanwhile, grew from $1.58 to $4.55. That’s a CAGR of 12.47%. I don’t know how investors could be anything but delighted with that.

S&P Capital IQ is predicting that EPS will compound at a 5% annual rate over the next three years, anticipating slower AUM growth due to particularly strong equity market performance as well as the possibility of rising rates which could impact fixed-income portfolios.

What’s interesting is that TROW kind of flies under the radar even though they have a fantastic dividend growth record.

They’ve increased their dividend to shareholders for the past 29 consecutive years. That’s almost three straight decades which includes more than one major stock market crash, multiple wars, and the Great Recession. Not bad.

And the dividend growth rate is pretty incredible – over the last decade, the company has increased its dividend at an annual rate of 16.6%. And it’s not slowing. The company just announced last month an increase in the quarterly dividend from $0.44 to $0.52 per share, which is an 18.19% raise. Even more spectacular, the company is also paying a $2.00 special dividend in April with an ex-dividend date of April 7, 2015.

Now, the dividend growth rate is higher than the rate at which earnings per share has grown over the last decade. However, the payout ratio is still moderate, at 45.7%. So they could theoretically continue to grow the dividend slightly faster than EPS growth for the foreseeable future.

The stock yields a fairly attractive 2.51% here. Factoring in the special dividend, the yield is temporarily boosted to 4.93% this year.

Another quantitative aspect about this company that shows its high quality is its balance sheet. The company has no long-term corporate debt. Zilch. And they have $3.4 billion in cash and fund investment holdings as of the end of 2014. So they’re in excellent financial condition with a flawless balance sheet. I love investing in companies with low debt, but it’s somewhat rare to find a company with no debt.

The firm’s profitability metrics across the board are robust. The company has posted net margin that’s averaged 29.24% over the last five years, and return on equity has averaged 23.39%. These numbers compare extremely favorably to other large asset managers.

Assets under management have increased from $269.5 billion to $746.8 billion over the last ten fiscal years. While global equity markets have positively impacted the company’s AUM in a large way, net cash inflows have also substantially increased total AUM. Net cash inflows have averaged $17.1 billion over the last decade with only FY 2013 seeing net cash outflows.

Qualitative Aspects

T. Rowe Price derives the vast majority of its revenue and net income via investment advisory service fees. And these fees are largely based on total AUM. As such, it’s imperative that the company maintains a healthy and growing source of manageable assets.

The great news about the business model – this gives it an economic moat – is that once someone is invested with TROW in some capacity, the odds are good that they’ll stick with them due to the inherent ease of just staying in place and the uncertainty of any benefits of switching. That stickiness tends to provide them durable advantages. As long as they’re performing as they should, odds are that current clients will largely stick with them and these metrics will attract inflows down the road, which will also be sticky.

One area of particularly strong growth for cash inflows and growth in AUM has been target-date retirement funds. These are funds that offer one-stop shopping for retirement planning. They automatically adjust a client’s asset allocation mix as they get closer to retirement and attempt to ensure enough income to last for a lengthy retirement. So instead of a worker having to choose five or six funds they may or may not understand, TROW makes it easy by offering one fund that’s based on a client’s age and expected retirement year.

I’ve long been hesitant to invest in asset managers because I’m a DIY investor and see successful long-term investing as something that’s not that difficult. However, I’ve been guilty of bias by assuming my perspective is shared by a healthy chunk of the general population. Hint: it’s not. I think it’s fair to say that most people lack the time and/or inclination to manage their own investments, which is probably a good reason why major asset managers continue to grow.

In addition, defined contribution plans such as 401(k)s offered through prospective clients’ workplaces often don’t offer individual stocks as an available asset class for investment. These DC plans are still dominated by funds, which, I believe, is why TROW’s target-date funds have been so appealing. I think back to when I knew nothing about investing and a fund that did all the planning and work for me based on my age and planned retirement year would have been a great solution.

As pensions continue to disappear and people become more responsible for their own retirement income, it makes sense that asset managers like TROW will continue to grow AUM. Moreover, there’s continued pressure on Social Security as a viable income source for many due to an influx of baby boomers and the potential for reduced income for future generations. These are long-term tailwinds for the company and the industry in general.

While the growth of passive investing through low-cost index funds remains a potential headwind for the company, the fact that their active management record remains one of the brightest in the industry bodes well for the firm. Over the last decade, 88% of the company’s mutual fund offerings outperformed their peers. And 100% of the target-date retirement funds outperformed peers on a total return basis over the last five years. Moreover, passive index funds have been around for quite a while, yet TROW’s growth over the last decade remains robust.

One last point is that TROW’s massive AUM gives them scale in an industry where scale matters. Larger AUM generates the kind of revenue and net income necessary to grow the business, attract quality managers, and continue developing the brand. And that size and scale also tends to speak for itself, as one is more likely to trust a large and established player than they are a smaller company.

Risks

I see the primary risk for the company as the rising prominence of index funds. Some recent large outflows have been apparently due to some clients interested in saving fees, and thus moving assets to index funds. T. Rowe Price’s issue here is that if it decides to offer low-fee index funds to appease clients and retain AUM, it would sacrifice significant fees. And I’d be willing to venture a guess that management feels it deserves the fees its charging due to consistent outperformance.

Another risk is the fact that the domestic stock market has risen so much so fast over the last five years that any correction could cause a reduction in AUM that may be compounded by the possibility of outflows as an emotional response by clients. While cash inflows have significantly contributed to the positive change in AUM over the last decade, market appreciation has accounted for much more. And TROW remains heavily exposed to equities.

Lastly, a more mild risk is the fact that TROW calculates its investment advisory fees on a daily AUM calculation, so any increased volatility could affect their revenue and net income.

Valuation

The stock’s P/E ratio of 18.19 is fairly attractive in this market, considering the quality and growth. And this compares well to the five-year average P/E ratio of 21.6. So whereas the market has typically valued this stock at a premium, it’s now valued at a discount. Furthermore, TROW’s yield has averaged only 2% over the last five years, and it’s now about 25% higher than that, even before factoring in the special dividend.

I valued shares using a dividend discount model analysis with a 10% discount rate and an 8% long-term growth rate. That growth rate is on the higher end of what I usually use, but it seems to be warranted here. TROW’s long-term dividend growth rate is substantially higher and the most recent raise just announced less than a month ago was almost twice that. And the payout ratio is moderate. There’s a chance that upcoming dividend raises could be lower if the market corrects significantly, but I believe that would be somewhat short term in nature like it was during the financial crisis. The DDM analysis gives me a fair value of $112.32.

Conclusion

Overall, this appears to be a very high-quality company. Fundamentally, it just doesn’t get much better. 30 consecutive years of dividend raises is mighty impressive by itself, but even more impressive is the rate at which the dividend has been growing over the last decade. And that even includes the major stock market correction during the financial crisis. No debt, robust profitability, a well-known brand name cultivated on outperformance, and long-term trends toward more DC business bodes well for them.

Passive index funds present the possibility of a long-term headwind while a stock market correction presents the possibility of a short-term headwind. However, index funds aren’t exactly new and the company has done well through previous market volatility. And these headwinds seem to be somewhat priced in as the stock appears to be undervalued based on numerous metrics.

Overall, I think this is an attractively valued high-quality stock, which is somewhat rare in today’s domestic stock market. The business model is easy to understand, they remain an entrenched player in their industry, and the metrics across the board are impressive.

This purchase adds $41.60 to my annual dividend income, based on the current $0.52 quarterly dividend per share. That doesn’t factor in the special dividend which will add $40 this year.

I’m going to include two current analysts’ valuation opinions below, as I use these to concentrate my reasonable valuation estimate:

Morningstar rates TROW as a 3/5 star value, with a fair value estimate of $89.00.

S&P Capital IQ rates TROW as a 4/5 star buy, with a fair value estimate of $96.80.

I’ll update my Freedom Fund in early April to reflect this recent purchase.

Full Disclosure: Long TROW.

What do you think of this stock here? An attractive investment candidate? What are you buying? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Edit: Corrected note about Great Recession.

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130 Comments

  1. Congrats on your purchase Jason!. I also look at money as the stream it becomes once invested properly rather than a cash pile. My last two buys have been MSFT and HCP.

  2. I recently initiated a position in TROW as well. I think as DIY investors we tend to forget that the majority of savers/investors out there do not have a very solid understanding as to how to put their money to work for them. So they need handholding. This is why I am slightly more bullish on another name I recently purchased.

    You are correct that Index funds could be a problem for TROW… However, in the long-run, as long as TROW can at least match outflows with inflows, they will generate higher revenues and earnings – since equities generally go up over time. And I can bet not everyone will be an indexer…

    If stock prices do go down, then TROW could be available at even better prices.

    Good luck!

    Dividend Growth Investor

  3. Hi Jason,

    I agree there is no bad time to buy shares, especially high dividend and strong companies. The snow ball is rolling and rolling.

    Cheers,

    RA50

  4. I think that this is a great purchase to add exposure to a part of the market you aren’t directly involved in. TROW is a well run company and they are also part of my own 403(b). For that I say “you’re welcome” for getting some of the fees from my retirement account 🙂 . As the government looks to streamline investing for the underserved working poor, companies like TROW will benefit from increased AUM.

  5. Nice pickup. I’ve recently purchased TROW as well (on 2/20) along with T and small starter positions in O and HCP after the recent drop in the REIT sector.

    Keep on keepin’ on.

  6. DM,

    Great purchase! It seems like several DIY investors are hopping into TROW since the announcement of their $2 special dividend. I have read probably 5 blogs of investors such as ourselves either buying or considering TROW as their next purchase.

    I agree with Retiredat50 above, its always a good time to buy dividend growth stocks, there is always some sort of value to be had in any market condition.

    Great analysis, and as always a pleasure to read.

    Thanks,
    Dividend Odyssey

  7. DM,
    I also bought some recently around the same entry price. It’s down even further today, though I’m going to hold off before buying a second lot. I was really impressed with the recent dividend increase announcements. When I started digging further, I loved not seeing any corporate debt on the balance sheet. Nice to see it trading below the special dividend increase level here.

    Excellent overview that you’ve provided above.

    -RBD

  8. Hi Jason,

    Seems like a very good purchase and a quality company. My recent purchase was KMI. Let’s hope they can continue raising their dividend 10% a year until 2020. Keep up the good work!

  9. DM,

    Nice buy, and in looking around a lot of dividend growth investors are making buys over the past week. I love it!

    TROW is on my watch list as well. With the pullback I was more inclined to add to my PM position under $80 instead.

    Best,
    DWC

  10. Dogma,

    I’m with you all the way. I’d rather have a stream of renewable cash than a pile of dwindling cash.

    Sounds like some solid purchases over there. MSFT remains high on my watch list and some of the healthcare REITs, like HCP, seem interesting here as well. Keep it up!

    Take care.

  11. DGI,

    Agreed. I’ve long had that bias, which is really silly. If this were more common, my blog would be about 1,000 times more popular. 🙂

    I’m with you on TROW’s odds of success. Not only does the broader market tend to go up over long periods, but there will be more money and people in the world over time as well. All of those trends mean that as long as TROW doesn’t bleed outflows, they should do well.

    Glad to be a fellow shareholder here!

    Best regards.

  12. RA50,

    The snowball doesn’t get rolling if you’re not out there pushing it along. I’d rather have that thing rolling downhill than sit on a pile of snow. 🙂

    Cheers!

  13. David,

    Appreciate your business as a shareholder very much! 🙂

    This is definitely an industry that I’ve wanted to gain exposure to, as I mentioned at the outset of the year. This is one of those trends that I wanted to jump on. The time seems right here.

    Let’s hope they continue to do well by us, both from the shareholder and client perspectives.

    Best regards.

  14. GG,

    Happy to be a fellow shareholder in TROW! 🙂

    The REITs are always interesting. I’m actively looking to fill a slot there, but just biding my time. Enjoy those dividends.

    Cheers.

  15. DO,

    Yeah, I’ve been wanting to get my hands on some TROW for a while now, as I’ve been discussing lately. It was on my recent watch list and I also mentioned it as my top idea in the asset management industry at the end of last year. I finally snagged some shares. 🙂

    Appreciate the support. Glad you enjoyed the analysis!

    Best wishes.

  16. RBD,

    The fundamentals here are really impressive. The dividend growth is especially robust, though the payout ratio has expanded quite a bit. So that’ll have to slow. Could be set up for a fall if the market corrects substantially, but I wouldn’t mind more TROW (or other high-quality firms) at a cheaper price.

    Glad to be a fellow shareholder. I really think we’ll do well over the long haul with this one.

    Best regards.

  17. MDP,

    I’m with you. If I weren’t already heavy in energy, I’d be more interested. But I’ve got some great stocks there at great prices already.

    Nice buys there. I think PM in particular is a great long-term value right now. Short-term problems for sure, but the long-term potential seems immense.

    Best regards.

  18. Sampo,

    Nice move there with KMI. One of the biggest energy companies around with fantastic assets. We should do well. 🙂

    Thanks for sharing!

    Take care.

  19. DWC,

    The journey to financial independence continues for many of us. It’s wonderful. 🙂

    PM seems like an incredible bargain here. I already have more than enough; otherwise, I’d be all over it.

    Thanks for stopping by!

    Best wishes.

  20. Hi Jason,

    Love reading your posts and I’m actually enjoying the fact that you are building a nice income stream! As a wise man once said: ‘Wealth is like a tree, it all starts from a tiny seed’. I seems your ‘seed’ is growing nicely while you are watering it every month :).

    One question I have based on reading your blog for some time. Is the above analysis everything you research on a company before buying it? Or are you doing a more extensive research on a company before buying but not posting it on your blog (not blaming you for this if this is the case!)? Do you read quarterly and annual reports for every company before buying and keep reading them after you bought?

    Keep going and enjoy your coming spring break!

  21. Well done DM! I have actually just recently added TROW to my watch list but I am currently looking to keep adding stocks from the energy sector. I also purchased PM last week which I know you agree with. 🙂

  22. Congrats on the buy! I’ve been watching TROW for a little while and am just waiting on the capital to invest! Glad to see someone else likes them for a strong buy, too! Great minds think alike 🙂

  23. Robert,

    Indeed! I think of my portfolio like a tree, where each stock/position is a branch. And each branch produces fruit (dividends) every month/quarter/year, which will one day be used to sustain my lifestyle. Meanwhile, the tree will stay intact. This is in direct opposition to investing in index funds or something else where you slowly and methodically cut the branches over time, hoping the tree will grow faster than you can cut it down. I prefer it my way. 🙂

    As far as analysis goes, I conduct all my analysis before a stock is purchased. If I start to feel pretty strongly about purchasing, then I start to compile the information as part of a drafted post. That way it’s somewhat easy to format the information and get an article ready for publishing. I don’t generally read annual reports every year for every stock I’m long on, but I’ve discussed how technology makes it easy to keep up on stocks after they’re purchased:

    https://www.dividendmantra.com/2014/11/is-managing-a-large-dividend-growth-stock-portfolio-time-consuming/

    When I have time, however, I browse quite a few annual reports. I do that for fun.

    Hope that helps! 🙂

    Best regards.

  24. FI Investor,

    Nice job there with PM. I don’t see how you go wrong with that one over the long haul, though one does have to factor in near-term headwinds.

    Thanks for dropping by!

    Take care.

  25. DM,

    We trust that you are enjoying spring break. Congrats on the new addition to the portfolio. Just think, there are now 52 companies with millions and millions of employees working hard out there making you money while you have fun in the sun. Now that’s living… All the best.

    FD

  26. Elise,

    TROW appears to be very high quality. The fundamentals are excellent and they have long-term tailwinds that seem to benefit them. A broader correction in either equities or fixed income could hurt them, but that would probably be a long-term opportunity.

    Great minds do indeed think alike. 🙂

    Cheers!

  27. I started a position in TROW as well and really like what the future holds. So many people ignore the fees aspect and while I think the majority can do well investing on their own, it’s hard to get the inertia for most people to change. So the key is to just get people started at TROW and then they will typically stick with them. TROW is another one of those toll road companies although they do offer more services. Like the buy.

  28. FD,

    You nailed it. All of these employees are out there working for me…so I eventually won’t have to. How wonderful is that? 🙂

    Looks like you’ve been busy over there as well. Keep it up!

    Best wishes.

  29. JC,

    Glad to be a fellow shareholder with you. I think we’ll do very well here over the long term.

    AUM should continue to grow over time as the market expands, more money is created, the population grows, and more people need to invest for themselves. We’ll see how it goes!

    Cheers.

  30. Good find on this. I used to have my 401k with them, very good company. I can’t wait to grow my fund and start doing this. This is money waiting to be taken!

  31. I think you made a great decision there, especially in light of the lack of debt combined with a special dividend. I also recently invested in a British company that had a history of excess cash being giving back on the form of special dividends – it’s great isn’t it?!

    Cheers

  32. DM,
    Thats $81.60 dividend that translates to 4.9% dividend for the first year (including the special dividend), but more importantly, the years and years of passive income TROW that will produce ahead. Great company with great management and excellent financials. I bought some NOV today as I am down 5% on my cost basis. BBL is creeping down again after a nice run these past few weeks. XOM hit another 52 week low, CVX yield appears juicy but the eps guidance is very week dividend growth might be affected. I know you are on the sideline on energy companies right now and TROW is one of the better and safer value compared to energy stock.
    Take care,
    FFF

  33. DY,

    No debt is always a good thing. More flexible and more possible cash to return to shareholders. 🙂

    HCP also seems solid. I’ll have to investigate their recent troubles.

    Take care!

  34. M,

    I love all dividends. I’m dividend agnostic. But I certainly enjoy special dividends. Something…special…about them. More cash flow is always a good thing. 🙂

    Best of luck with your recent investment!

    Cheers.

  35. DGJ,

    This is a new position. You’ll notice I had no TROW in my portfolio.

    High-quality asset managers have done really well over the last decade, even counting the major crash in there. I wouldn’t mind owning a couple more of them that differentiate themselves somehow.

    Best wishes!

  36. FFF,

    Definitely. I’m looking forward to years of passive income ahead. And that special dividend basically returns $2 back to me right away, effectively allowing me to take some capital off the table. I think TROW will do well over the long term, especially with their outperformance in the funds they offer.

    Good luck with the energy plays over there. A lot of volatility in that sector right now, but a long-term investor will just use that to their advantage. 🙂

    Best regards.

  37. We’re in sync! I became a proud owner of TROW last week. This company has much better prospects than others (such as WMT) right now. It’s a wonderful gem to have in any DGI portfolio.

  38. Spoonman,

    Nice. Great minds think alike, my friend. Very glad to be a fellow shareholder here.

    The valuation seems right, the fundamentals are strong, the recent dividend raise was fantastic, and the special dividend is just icing on the cake. This one looks like a solid pick right now. 🙂

    Best regards!

  39. Mantra,

    I like it. A lot of have posted their reviews on them and we knew that big div increase was coming, obviously didn’t predict the special dividend. My first brokerage ever was T Rowe and I still have my old fund that I started when i was 20 there.. it’s funny. Great purchase, no leverage, $750B under management, great growth in fundamentals you want to see, great track record for dividend increases, as well as a great corner stone in investment services. Congrats on the addition and looking forward to seeing you reap the benefits!

    -Lanny

  40. Well do I have some good news for you! Not only did TROW increase the dividend to 0.52 they have a special dividend of 2 bucks coming your way in April! I will be buying before the ex-dividend date. This company was on my watch list! Time to deploy some capital that way. Thanks for the analysis!

  41. Disregard my previous tidbit. Clearly, I did a speed read and didn’t see that you already included the special dividend! Lol I am not a moron just over zealous!

  42. And here I thought I missed the special dividend. Buy now and get 2% cash back! And 2% every year thereafter! Quite the deal.

    I’m also keeping an eye on AT&T right now. They’re getting kicked out the the Dow next week. If that causes the share price to drop, I’d be happy to step in and take the 5.6% dividend off someone’s hands.

  43. I’ve been reading your blog since last year and I have a few questions.

    Do you ever get nervous that dividend stocks are your only retirement strategy? I’ve read a lot of traditional material that says to “diversify” stocks, bonds, mutual funds, real estate, etc. But you seem to only be doing it with dividend stocks and diversifying with buying shares from different companies.

    I’m wondering if you ever get nervous about that being your only strategy and if you’re not nervous, were you ever nervous about that in the beginning? When you first started out did you have any role model investors? I haven’t bought any dividend stocks, I just have a Roth IRA, how much do you think a newbie could start with? Could I start with 3,000 or 4,000?

    Any guidance would be appreciated, thank you.

  44. I’ve been meaning to put them on my watch list, so thanks for the reminder. This company seems really solid and might eventually get a place in my portfolio.

    – HMB

  45. Lanny,

    There’s just not much to dislike here. Other than the exposure to equities and some headwinds regarding passive funds, TROW is about as stout as it gets. And the valuation seems pretty attractive, all considered. 🙂

    Thanks for dropping by. Keep up the great work over there.

    Cheers!

  46. Sukina,

    Ha. No problem at all. It was still good news, even if I already knew about it. 🙂

    Glad I was able to provide some quality analysis. Would be glad to have you join me as a shareholder. It’s great to receive basically $2.50 back right off the bat.

    Take care!

  47. Henry,

    I’ve looked at BEN as well. That was actually one of the other asset managers I mentioned I was interested in at the end of last year. But TROW had better fundamentals across the board and a much higher yield, especially with the special dividend. I don’t mind dipping down below 2% in yield, but I’m pretty selective there. Wouldn’t mind owning BEN as well, however, due to the strong brand and similar quality.

    Take care!

  48. Justin,

    Yeah, the special dividend is very nice. No promise of it being anything recurring, but I’ll take it when it comes. 🙂

    T’s one I picked up not long ago myself. I think any negative price action due to the Dow reshuffle would be a solid opportunity.

    Best regards.

  49. Lila,

    I’ve never been nervous at all. I’d actually be more nervous if I were heavy on bonds right now, due to the odds of rates rising over the long haul. Stocks outperform fixed income by a pretty wide margin over long periods of time, though not without added volatility along the way. You can read about Warren Buffett’s (and my) perspective on that in a recent article I wrote on that:

    https://www.dividendmantra.com/2015/03/warren-buffett-on-volatility-and-risk/

    Or you can read a bit more here:

    https://www.dividendmantra.com/2014/07/a-0-allocation-to-fixed-income/

    But 100% stocks isn’t the right way to go for everyone. As I wrote about in that first article, it’s best if you’re honest with yourself and you invest accordingly. The worst thing you can do is think you can handle the volatility of stocks and then realize at the wrong time that you can’t. And if you’re not comfortable with that, you should invest accordingly.

    I’ve never had any “role models” per se. I’ve kind of always done my own thing. I’m not sure if this is widely known or not, but dividend growth investing, especially as it relates to attaining financial independence, wasn’t all that popular when I first started. And there certainly wasn’t this large community. That all kind of came after I started writing a lot about this stuff. But I guess I just blazed my own trail. I did my research, felt confident, and never really looked back. And I still haven’t to do this day.

    Starting out with $3k or $4k is similar to what I started out with back in 2009, so I see no reason why that wouldn’t also be true today. For some reason, some think you need a portfolio full of 50 or something stocks right off the bat, and that’s just not true. I started by building my portfolio one stock at a time and it served me very well. I’d recommend not widely diversifying just for the sake of it, ignoring valuation and quality along the way.

    But I wrote an article a while back on starting all over again, which might provide some value to you:

    https://www.dividendmantra.com/2014/05/if-i-were-starting-all-over-again/

    The stock picks aren’t evergreen, obviously.

    I hope that helps. I can only say do what you feel comfortable with. Not everyone will be comfortable doing what I’m doing, and that’s okay. I’d recommend reading a wide variety of books on all subjects investing, saving, financial independence, and then figuring out what works for you.

    Best regards!

  50. Great buy Mr. Mantra. You’re doing fantastic my friend. See all the love you get? That’s from being solid. I wish you continued success and happiness. I’ll be right by your side hustling and doing my thing. Much Love to you bro.

  51. DH,

    I get a lot of love, that’s for sure. I’m really blessed in that regard. 🙂

    Appreciate all the support. Glad to be a part of this great community, fighting for freedom!

    Best regards.

  52. Great find again! Hey, the Dow was down 300 points 2/3 three last sessions, it’s obviously a good time to find value. I’ve made some purchase myself. If the Dow continue to dip, I’ll buy some more then to average down. But I can’t pass the oppotunity.

  53. Ho hum, I had money accumulating in my FRIP, all set to be reinvested into TROW, and the reinvestment day just happened to be today. Funny that your recent buy article came out on the same day! Makes me feel even better about what I FRIPed into, knowing that you are a co-shareholder 🙂

    Completely share your sentiments about value being hard to come by these days. I was definitely glad for the dip today. Hopefully it continues tomorrow.

  54. Jason,

    great buy! I agree, that it makes totally sense to buy parts of companies (stocks) based on their relative individual valuation and ignoring the cycle of the broad stock market. The important point for me is, that I have to stick to my investment criteria independingly from the market cycle. If won’t find proper buying opportunities, I would go in cash accumulation modes, instead of buying overvalued companies.

    Regards

    Marco

  55. I added to my TROW position in February and again this past Monday. I now have 1/2 a position. Will try and top it off over the next month or so.
    As a side note, I have had accounts with them (IRA and brokerage) since the early 90’s and I love their company and customer service.

  56. Heh, I suspected this would be your next buy. I’ve long been interested in BEN, but I can see the strengths of TROW. I actually intend to compare the two in detail int he next week, so that I can figure out which one to keep on my watch list. Is that it for you in terms of asset managers, or are you also looking at names like BEN or BLK?

  57. I like your acquisition of TROW. It is has been in my watch list for about 6 months or so. Definitely one of the blue chip financial companies. I recently went on a buying spree, as this is the time of year that I max out my IRAs. I added to my positions in GE, T, and WFC. And made several new purchases in DGX, GIS, GLW, HCP, IRET, KMI, and WGL. A few of those were more spec plays on my part, but overall I felt were diverse and reliable additions.

  58. Nice analysis. As far as reits, you should check out Forest City which will be convertig to a reit late this year. I think this stock is very compelling.

  59. Welcome to the club, sir! I invested in TROW last year and haven’t looked back. Also added Blackrock about the same time. Quality asset management firms definitely have a place in a DGI portfolio. I just added to my stake in BAX yesterday with their recent dip. Thanks for turning me on to that one.

  60. Thanks for the analysis, Jason. I also just bought TROW with the market drop yesterday. It was the final portion to max out my Roth for the year.

    I was initially a little worried about a move of investors away from active management into indexes and the new “robo-advisors” like Betterment, Wealthfront, and Schwab’s Intelligent Portfolio. However, the investing market is huge and only a small portion of us likely actually enjoy managing the money ourselves. I don’t think we have too much to be worried about.

    Scott @ twoinvesting.com

  61. Vivianne,

    Same here. I buy when the value is there. If stocks continue to drop, then I simply use that opportunity to average down. 🙂

    Keep it up!

    Best regards.

  62. Seraph,

    Hey, that’s great. Glad to be a fellow shareholder. 🙂

    TROW appears to be really solid. I can’t really find anything that I don’t like about the company. The passive funds present a long-term headwind, but if they can keep their track record for outperformance up, the odds seem good that they’ll continue to attract inflows. Combine that with more people, more money, and more saving, and the long-term trends bode well.

    Cheers!

  63. Marco,

    Right. I look at the stock market like a store where there’s a good variety of merchandise. Some of the merchandise is expensive. Some is cheap. But it’s not all priced the same. I haven’t yet run into a situation where the market didn’t have any cheap merchandise, but I’d refrain from buying stocks if that became the case.

    Cheers!

  64. Rob,

    A shareholder and a client. Nice. You get to experience both sides of the coin. 🙂

    TROW appears to be in a good position with pretty steady inflows over the last decade. They (and we) stand to do well if they can continue that.

    Take care!

  65. Thanks so much for replying. I appreciate it. Thank for the links too. I didn’t realize the dividend retirement strategy wasn’t that popular when you first started. I assumed that you came across other blogs and books that had done this and you decided to also do it. It takes a lot of courage to do what you did.

    I’m not sure I could have done what you did. I don’t like doing things unless its been tried and proven by someone first, but now seeing your progress, I realize that it’s possible to live off the dividend strategy from your blog and other div bloggers. So I don’t mind taking a step forward and purchasing a few shares. I also like that you explain your process and you’re not vague about it.

    In the beginning of my FI journey I read a lot of books where people were vague about how they made it. I saw interviews on TV where a journalist would ask a lot of questions and certain rich people didn’t want to give up the details because they didn’t want the mainstream to copy them. I just felt really frustrated because I was all, “Well I’m happy you made it, but what about the rest of us. Would it really hurt you to explain a little bit?”

    A lot of “get rich” books want people to borrow a lot of money, work until they’re 65, or do something that is not realistic. Some people like Bill Gates had certain advantages (I read Outliers) and others have certain talents like singing. I had neither. I like that you’re not pretentious. Like you explain step by step which brokerage you use, what software you use, what your budget is, how much you make, which stocks you buy, sell and why.

    All of this is *Very Helpful* and I honestly appreciate your openness. It also means that this can be achievable by others and I like that you’re helping other people become FI too. A lot of people and companies talk about transparency but you truly are transparent.

    So you’re close to the $200,000 mark and you started in late 2009? Is that right? so does this mean that when you’re 37 you’re going to have $400,000? If you keep going at the same rate that you are, I’m kind of wondering if by age 50 you’re going to have a portfolio close to $700,000-900,000? What do you think?

  66. DD,

    Oh, looking forward to the comparison! 🙂

    This probably won’t be it for me. Like with other sectors and industries, I like to spread my bets out. And many of the asset managers differentiate themselves in a number of ways. I find BLK, BEN, and EV as a few other attractive choices. I may end up owning a few different stocks here.

    Best regards.

  67. BCS,

    Nice. Nothing like going on a big buying spree like that. Some people love going on a shopping spree at the mall. I prefer going on a shopping spree for stocks. 🙂

    Enjoy the additional dividends. That should boost the portfolio’s output nicely. And glad to be a fellow shareholder in a few companies there as well.

    Cheers!

  68. wtd7576,

    Hmm, maybe if they get five or so years of dividend increases under their belt I’ll take a look. 🙂

    As of now, I’ll be sticking to some of the tried and true in REITs. I hope to fill another slot there within the next few months, depending on valuation.

    Cheers!

  69. Chris,

    I’m with you. A few high-quality asset management firms definitely deserve a look/investment. Few people are really interested in DIY investing. Thus, funds should continue to grow in popularity over time. And those presenting the best funds (performance, simplicity, etc.) should be able to capture a solid chunk of the market.

    Glad to be a fellow shareholder!

    Best regards.

  70. Scott,

    Glad the analysis provided some value your way! 🙂

    I used to have the same concerns. But TROW has managed some pretty impressive inflows over the last decade, even as all of those headwinds have presented themselves. It won’t take much in terms of inflows for them to grow at a healthy rate over the long haul, so I’m not real concerned here. More people, more money, and an increased need for investing means the entrenched players should continue to capture business.

    Thanks for sharing!

    Best wishes.

  71. Anonymous,

    Thank you very much. Glad you appreciate the openness and sincerity. I always wanted to pull the curtains back and show exactly what all of this looks like. Maybe I get there when I’m 40, maybe it takes until I’m 42 or whatever. Either way, the results will be out there in the world. No hiding anything.

    I started in mid-2010. So it’s taken me almost five years to get to this mark. It’s really tough to say when I’ll hit certain portfolio values because a lot of that depends on market conditions. I could hit $400k when I turn 37. Just as easily, the market could drop and I’d be sitting on $300k. No way to tell, but it’s also important to remember that portfolio values matter little. In fact, I’d prefer a smaller portfolio in terms of dollar value, which would offer me cheaper stocks to buy and propel my dividend income along even quicker. I think it takes time to really understand that and become one with that mindset. Until you do, however, it’ll be tough to succeed with this strategy.

    Best wishes!

  72. DM,

    TROW has been on my mind in terms of ‘I wish I had the money right now.’ They have been on my watch list for a while, just an exceptional company in terms of recent and historical performance.

    Congrats,
    Gremlin

  73. Gremlin,

    I hear you. I think I’ve always got a basket of stocks that fall under that category of wishing I had more money. So many stocks, so little capital. 🙂

    Cheers!

  74. Seems like a nice diversification for your portfolio, Jason. I’m not so familiar with TROW. But your purchase has prompted me to further look into it. Thanks for that. 🙂
    Is just loaded up on PM, as it dropped below 80$. Just a bit unfortunate that for us here in Europe buying the $$ is becoming more and more expensive.
    Take care.

  75. Been lurking on your blog for about six months, really changed my outlook on what money does and what it really means. Really fascinating, thank you for sharing. I just started investing about a year ago, just turned 26 now and approaching a modest 100k portfolio thanks to your advice. Really means a lot. I hope you continue this blog!

    PS: I haven’t initiated a position in royal dutch shell but apparently there’s talks of a potential dividend cut, is it a good time to initiate a position or is it really as shaky as people are making it seem?

  76. Hi Mantra!
    I bought W.P Carey inc (WPC) today, I hope that our buys help on our way to FF.
    Your buy seems like pretty solid thing, I have to keep that one on my mind.

    Cheers!

  77. Great purchase, Jason! It’s a fantastic company and growing so quickly even after all these years. This was such a good read, and I look forward to seeing that special dividend hit your account. I hope I’ll own it with you at some point down the line. I also discovered EVR in this sector recently and want to dig in a bit deeper. I hope you’re having a nice and relaxing week as planned!

    Best Wishes,
    Ryan

  78. Hi Jason, over here in the UK, I purchased Aberdeen investment (ADM) a year ago. More internationally focused, 4+ dividend yield and exceptional dividend growth. Loaded up on PM, T, HCP, EMR, SO today.

  79. Seems like a solid buy to me. A lot of the big banks in Canada have been snatching up US wealth management companies to try and grow their US/WM arms. Do you think there’s a decent chance you think they might get bought out in the near future?

  80. Any opinion on someone taking their “safety” net that they set aside for emergencies and put “limit” orders of quantity 100 of each stock to buy all or none at a very low price. This way the money can be withdrawn for emergency if needed before order placed, but is still put in place in case there is a large pull back on stock pricing. Or do you see a risk in doing this?

  81. Jos,

    Nice buy there on PM. As it continues to become cheaper, it just becomes a greater long-term opportunity. If I didn’t already have 100 shares I’d be all over it. 🙂

    Cheers!

  82. AJ,

    That’s really great. So glad to hear it. You’re off to a fantastic start! 🙂

    As far as Shell goes, the FCF isn’t spectacular. But I don’t see anything pressing that worries me about the dividend. If oil stays extremely cheap for a protracted period, then all bets are probably off looking out over a long period of time.

    Appreciate the support. Stay in touch!

    Take care.

  83. Anha,

    Nice buy there. WPC is one of my top candidates for a new REIT holding in my own portfolio, to replace the hole left by the sale of ARCP. Great track record there. 🙂

    Thanks for dropping by.

    Best wishes!

  84. Ryan,

    Thanks! Glad you enjoyed the analysis. 🙂

    I’m also looking forward to seeing that special dividend hit the account. It’ll probably be spent as soon as it gets there. I just can’t help myself!

    The week is going great. We saw a play tonight that was really entertaining. I’m fortunate.

    Hope you’re having a nice week as well over there. Keep up the great work.

    Best wishes.

  85. Jon,

    Sounds like you indeed loaded up. Awesome!

    I lack the capital these days to really go on crazy stock shopping sprees like I used to, but I’m happy just to continue saving and investing while really enjoying the ride.

    Glad to be a fellow shareholder with you there in a few companies. I hope they serve us very well over the long term.

    Best regards.

  86. DW,

    I have no idea if that’ll happen with TROW or not. It’s certainly not as affordable as City National or anything with a much higher price tag. But I suppose it’s not outside the realm of possibility, depending on regulation and all that. I actually hope they leave TROW alone. I’d rather just collect my growing dividends for the next few decades. 🙂

    Cheers!

  87. Penny,

    Outside my comfort zone and I also don’t keep an emergency fund that would be large enough to attempt anything even close to that. But perhaps that might work for some others that might chime in.

    Cheers!

  88. Penny

    Your strategy idea is similar to selling a put, with no premium for your risk. The risk there is if the stock really drops you could own a a stock that is beaten down for some reason. One could argue, stay with quality stocks to mitigate risk, but one must realize there is always risk. To be successful in investing one must evaluate risk and act accordingly. Understanding your risk and positions you put yourself in as an investor are critical to keep you from over reacting or inaction. Both types of actions carry risk. Heck life is a risk!

  89. I stayed with CAT & DE. Both too pricey “for me” to buy now, but at a lower price would be happy to jump in – and they are both great companies. THANK YOU.

  90. Jason,

    Always enjoy reading your articles, and you seem to generate a comment stream similar to those on Seeking Alpha. The conversations in the comment sections add an immeasurable amount of knowledge so I am always grateful for all participants.

    I am looking for a solid purchase this month and TROW wasn’t on my watch list (I may have to check them out as I could use a finance section stock). However, I was also looking at adding to my OHI position, or starting a position in EMR. EMR seems have to fallen greatly and I can’t help but notice the great discount on this wonderful company. What do you think about their current state for a long term DGI investor?

    Thanks,
    RyanV

  91. today I got Coal India Ltd interim dividend of 20 INR (purchase price 296 INR).This company IPOed only 4 years so and has consistently averaged 6-10% DY and its stock price is up about 50%.It occupies about 9% of my core portfolio.CIL is the world’s largest coal producer , is owned by the government of India and generates tonnes of cash.GoI does not like it’s dividends go down,so at times I wonder what kinda DY I m going to end at 15-20 years down the line !!

    Just thought of sharing with you ! 🙂

  92. RyanV,

    Appreciate the support! 🙂

    I’m really lucky that I have such a great readership. I do my best to provide high-quality content on a regular basis, but you readers make it the wonderful community that it is.

    As far as EMR goes, it’s a great company. I have nothing but good things to say about the business and its stock. I own shares, so I’d be glad to be a fellow shareholder. And the valuation seems pretty solid right now. I don’t think you’d go wrong buying EMR here or at any point when it’s not overvalued.

    Thanks for dropping by!

    Best wishes.

  93. harsh,

    Sounds like you did your research over there, which is all you can really do. Now it’s up to the business to perform and make you wealthy. 🙂

    Best of luck with INR!

    Cheers.

  94. “After all, the major reason to be a dividend growth investor is to turn $1 into a steady stream of nickels, quarters, and eventually dollars”

    Very well said! I too am a big believer of taking a small amount of money and turning it into a raging waterfall of money coming your way. Big kudos.

  95. Mark,

    We’re completely on the same page, that’s for sure! 🙂

    Appreciate you stopping by. I hope you spend your years enjoying a waterfall of cash.

    Cheers.

  96. Dividend Mantra,

    Good Analysis! This was also my last purchase, if I would have known about this last drop I would have waited for NOV, XOM or BBL. Oh well, being no mind reader and needing a little more diversification I purchased TROW. So far in this sector, I’m exposed to Blackrock (BLK), Eatan Vance (EV), Oaktree Capital (OAK), T. Rowe Price (TROW) and since there is a lot of financial investments allocated within these others I’m also invested in Markel (MKL), Bershire Hathaway (BRK-B) and Aflac (AFL), even though two pay no dividends I’ve been happy with the returns and like the diversification.

    Good luck and great posting!

    Raymond

  97. Raymond,

    Nice! Glad to be a fellow shareholder of TROW. I’ll probably end up owning a chunk of BLK and EV at some point as well. Both are great companies.

    Sound like you have a very diversified and well-rounded portfolio over there. Keep up the great work!

    Cheers.

  98. Great financial name pick up that’s not a traditional bank. I am also liking a lot of the TROW numbers and may consider this one as well. Great long term dividend history too. BEN and BX are kind of popping up on my radar too. Thanks for sharing.

  99. DivHut,

    Glad the analysis provided you some value. There’s a lot to like here for sure. I don’t know if I’d feel comfortable making it a large, core position, especially with the market so elevated, but I certainly feel good about initiating a stake here and seeing where it goes. And that special dividend will certainly help. 🙂

    Take care!

  100. “I can’t quite remember a time when I felt that value was so hard to come by.”

    While certainly it’s still not a great time for values, I have personally felt that things have been getter a little better on that front in the last few months. Many consumer staple stocks have been flat to down for a while because of the stronger dollar and yields there are quite reasonable now. Euro stocks are also fairly cheap, although there are fewer that fit a dividend growth model. Energy stocks are, of course, much cheaper than they were, but I’m still betting there is going to be one final flush when storage is completely full. The free fall in oil is also affecting tangential players, like Canadian banks and GE, potentially setting them up for a good entry.

    One final thought: remember you can always add to your existing positions if they are cheap.

  101. S.B.,

    I guess it depends on where you’re looking. Some of the European stocks are cheaper now than they were recently, like DEO. Some are more expensive, like UL. I was able to buy UL not long ago at near $40. It was $44 or so recently, now down to $42. It’s all relative. Of course, with the way the currency works, one isn’t automatically getting the benefit of a higher yield from a cheaper stock price, like we’d get here with domestic stocks. But I’m sure that’ll work itself out over the long haul. Some other consumer staple stocks are cheaper, but still quite expensive against a historical valuation.

    Energy stocks aren’t particularly cheap as a group, in my view. The integrated plays have the refining operations, which will help buoy them. But I don’t know if oil ~50% cheaper now than it was a year ago is really baked in to these prices/valuations. I guess we’ll see as the year goes by and EPS drops. And we’re starting to see dividend cuts and repurchases suspended across the sector. If volatility really picks up with some of the quality stuff, I might be interested again.

    Canadian banks seem to be a good place for value. That’s actually where I went late last week, which I’ll be posting about soon. Definite headwinds there, however.

    Thanks for dropping by!

    Best regards.

  102. Love this buy. I’m curious, though, as you’re purchasing shares of Investment Management Companies. Have you ever considered purchasing BLK? Yield isn’t extremely high at 2.3% but with such a low payout ratio, there’s plenty of room for growth. Free Cash Flow generation is expanding rapidly. Would love to hear your take on it. Have a great week. Keep inspiring!

  103. Chris,

    BLK is another one I really like. Their AUM is really massive, so I do wonder about growth opportunities in comparison to smaller players like TROW. Nonetheless, they’ve done really, really well over the last 10 years and I like that they have the iShares ETFs as well, which gives them some diversification and differentiates themselves from others. It’s sometimes splitting hairs with some of these companies, which is why I often own a few major players in many industries. I’ll probably also own a chunk of BLK at some point. 🙂

    Cheers!

  104. GREAT article, once again. Thanks for great advice in dividend stocks, I have been trying to pick the next big thing and now I am focused strictly on quality stocks I know and use that have great dividends. My goal is to get $12000 a year so I can have my own mini-pension. Ive been frugal and saved, but late to this dividend game but I am $1k for year now and buy when stocks are down. Thanks again for motivation. (KO, MCD, PFE, PG, VZ) so far looking at IRM, ED in future once I get PFE & PG at the 100 mark). Do you think I have a good mix? Thanks

  105. Michele,

    A miniature pension. Exactly! That’s a great way to frame it. Plus, dividends are a lot less less likely to be eliminated than pensions, as recent trends show. 🙂

    Looks like you have a solid mix there. Stick with it and remain consistent. You’re already 1/12 of the way there.

    Thanks for the support.

    Best wishes!

  106. Hello Jason,

    I’am considering some investments in the financial industry as well and I’am wondering why you did not choose Franklin Resources (BEN). Regarding AUM TROW and BEN are in the same league and they share similar fundamentals. The dividend yield is smaller for BEN, but the valuation seems more appealing for BEN right now. I’am very interested in what was your reason to buy TROW and not BEN at the moment, because I would prefer BEN at the moment. Did I miss something?

  107. Ralf,

    Well, I think they’re both great companies. I chose TROW because of the much higher yield, better balance sheet, better margins, better ROE, better ROIC, and higher growth rate for both EPS and the dividend over the last decade. But BEN is a stellar stock as well. It’s really choosing between great and possibly slightly greater. Wouldn’t mind owning either or both. 🙂

    The forward P/E ratios are similar, which seems to factor in the projected higher growth rate for TROW.

    Best of luck with the choice!

    Cheers.

  108. I just joined the happy TROW boat this morning! Got for $2K of it at $81.34 a share. I had put it in my wish list the other day, and with the slight drop price this am + the special dividend… I went for it. Let’s keep up piling them up :).

  109. FabSavings,

    Awesome! Glad to have you aboard. 🙂

    Enjoy that special dividend. A little extra cash flow which can be turned into even more cash flow in the future. Gotta love it!

    Best regards.

  110. Hi Jason,

    “They’ve increased their dividend to shareholders for the past 29 consecutive years. That’s almost three straight decades which includes more than one major stock market crash, multiple wars, and the Great Depression. Not bad.”

    I think you mean the “Great Recession” as the Great Depression ended in 1939. Otherwise, keep up the great work! I really look forward to reading your content every week.

  111. This is question is off topic but I searched your site for information and opinion about deferred income annuities. What do you think about these products? My father recently sent me information about New York Life having a product that you can pay into on a monthly basis pre-retirement. Thanks…I’m new to your blog.

  112. Cecilia,

    I find annuities unattractive. You’ll typically do much better by just investing that money yourself (which is what the insurance company will do anyway). Not only that, but they’re typically loaded with fees. They also lack liquidity. And you’d also have to count on actually living long enough to warrant the product as well as hoping the insurance company doesn’t go out of business. All in all, it’s typically a high-fee, poor investment with no diversification and strong odds that you’ll do poorly compared to just investing it yourself.

    “…a product that you can pay into on a monthly basis pre-retirement.”

    That’s exactly what I’m doing. I’m buying my freedom one stock purchase at a time. Except I’ll own all the equity and collect the dividend income for years and years to come. No need to worry about an insurance company still being around 40 years from now. And no need to pay sky-high fees.

    Just my take on it. I’d recommend some strong research into that.

    Cheers!

  113. My parents are retired and although my father is not very communicative about money mgt. he and my mother seemed pleased with their annuity. Why do some many people choose this option for their lump sum upon retirement then (other than the probable sales pitch which would discourage my father anyway)? I appreciate your response! Thanks.

  114. Cecilia,

    You’re asking me a question that’s impossible to answer. I cannot say why some people would choose annuities over anything else, or even in combination with other investments. You’d have to ask those people directly. Like I mentioned, I’d recommend some strong research into what annuities are, how they work, and how they’re typically structured.

    Cheers!

  115. Thanks. Informative blog. I liked the refreshing emphasis on frugality and your specific sharing of investment.

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