I’m happy to announce that I bought T. Rowe Price (NASDAQ: TROW) stock yesterday. My stock buys have been few and far between the past 90 days. The only major stock buys I’ve had lately were Flowers Foods, Target, and Wynn Resorts. The first two purchases were by design, the third was 100 assigned shares from a WYNN option that went upside down. For the most part I’ve sold options and I’ve been holding my cash. I must admit, it feels good to buy stock again.
The presidential election is almost behind us, then it’s the holidays. Markets have shown more weakness the past 30 days, but I think we’ll be mostly stable through the end of 2016. I still feel very strongly that a sizable market correction is coming in Q1 of 2017. Because of this, I’m mostly selling short-term put options (expiring before December 31st), and selling covered calls (expiring near the end of Q1 or early Q2). On the stock side, I’m only buying stocks that are seriously undervalued or stocks that I already own, to get to 100 shares. TROW fits both criteria.
TROW has been a popular stock in the dividend investor space, and rightfully so. This stock has taken a beating all year. At market close yesterday, TROW was trading at $65.88. The stock is trading near the bottom of its 52-week range. Over the past year, TROW has been as low $63.57 and a high of $79.00.
I bought 38 shares of T. Rowe Price stock at a per share price of $65.76, totaling $2,499. This latest stock buy adds $82.08 to my forward annual dividend income.
TROW Business Summary
T. Rowe Price Group, Inc. is a financial services holding company. The Company provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds distributed in the United States and other investment portfolios. It operates through investment advisory business segment. Its assets under management are accumulated from a client base across over four primary distribution channels, including third-party financial intermediaries that distribute its managed investment portfolios in the United States and other countries; individual the United States investors on a direct basis; the United States defined contribution retirement plans, and institutional investors across the globe. It manages assets, including the United States and international stock, blended asset, bond and money market mutual funds, and other investment portfolios. The Company offers advisory services, distribution management and administrative services. Source: www.schwab.com.
TROW Dividend Info
- Annual Dividend Yield of 3.28%
- Annual Dividend Rate (IAD) $2.16
- Payout Ratio (TTM) of 50.91%
- Dividend Coverage Ratio (TTM) of 196.42%
- 5 Year Dividend Growth Rate of 14%
T. Rowe Price has paid a special dividend twice over the past 5 years; $1 in 2012 and $2 in 2015. I’m not ready to call this a trend, but I’ll take another one. If not, a healthy dividend CAGR of 14% is enough to keep me interested in TROW stock.
The F.A.S.T Graph below shows that TROW is trading below its normal P/E Ratio of 21.1. The stock is well below the blue line which indicates that TROW stock is undervalued . It also means that TROW is trading under the company’s normal P/E Ratio.
- Morningstar ranks TROW 4 out of 5 stars, with a fair value of $77
- S&P Capital IQ ranks TROW 4 out of 5 stars, with a 12-month price target of $78, and a current fair value of $71.70
Markets are overvalued. However, there are still undervalued stocks out there. TROW is a great example of an undervalued stock in an overvalued market. There are a few stocks I’ve been watching. GILD is on my shortlist too. I’ve been selling GILD covered calls and GILD cash secured puts; hoping to make some side money and eventually get another 100 shares on the dip.
This addition of 38 TROW shares has helped me cut my cost basis. My overall cost basis on 100.65 shares is now down to $72.29 per share. Soon, I’ll start selling covered calls on these 100 shares. This will hopefully allow me to cut my cost basis to below market value.
What do you think of my T. Rowe Price, stock purchase? Are you an TROW shareholder? Are you buying or selling any stock?
Full Disclosure: Long TROW