T. ROWE PRICE GROUP INC. $64 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 253.5 million; Market cap: $16.2 billion; Price-to-sales ratio: 6.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.troweprice.com) sells mutual funds and wealth management services.
On December 31, 2011, the company had $489.5 billion of assets under management, up from $482.0 billion a year earlier.
That’s mainly because T. Rowe Price sold $11.0 billion of mutual funds (net of redemptions) during the year. It continues to see strong demand for its “Retirement Funds,” which invest in its other funds and automatically adjust the buyer’s portfolio balance according to their age. Retirement Funds accounted for 68% of the company’s mutual fund sales in 2011.
T. Rowe Price’s fee income varies with the value of the assets it manages. That’s why its revenue rose 16.0% in 2011, to $2.7 billion from $2.4 billion in 2010. Earnings rose 15.0%, to $773.2 million, or $2.92 a share, from $672.2 million, or $2.53 a share.
The company has also raised its quarterly dividend by 9.7%, to $0.34 a share from $0.31. The new annual rate of $1.36 yields 2.1%. T. Rowe Price has raised its payout every year for the past 26 years.
The stock is up 32% in the past six months; it now trades at 19.9 times the company’s forecast 2012 earnings of $3.21 a share. That’s a reasonable p/e ratio in light of T. Rowe Price’s strong profit potential as baby boomers save more in their final working years leading up to retirement. The company is also debt-free, and holds cash of $897.9 million, or $3.55 a share.
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