Growth Beats Yield at This T. Rowe Price Mutual Fund
The T. Rowe Price Dividend Growth Fund has lagged the broad market amid higher interest rates, but the tide may be turning.
![stacked blue arrows pointing up](https://cdn.mos.cms.futurecdn.net/dSckJw2RKnhVrtpw9grFjH-415-80.jpg)
Context is everything. For more than a year now, a handful of companies – some of which don't pay a dividend – have fueled gains in the stock market, leaving funds that don't hold those companies behind.
That goes a long way to explain why the T. Rowe Price Dividend Growth Fund (PRDGX) – a member of the Kiplinger 25, our favorite no-load mutual funds – has lagged the S&P 500 over the past 12 months.
The fund owns Microsoft (MSFT) and Apple (AAPL), but not Nvidia (NVDA), Alphabet (GOOGL) or Meta Platforms (META), three of the biggest gainers over the past year. "It's been a tough relative period for anyone who's an income-oriented investor," says the fund's manager, Tom Huber. "But on an absolute basis, the fund has done well." Dividend Growth has gained 16.3% over the past 12 months; the S&P 500, 21.5%.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Increasing dividends matter more than yield at this fund. Huber favors large, competitively positioned firms that generate cash and have a goal to increase payouts over time. The fund's overall average dividend growth rate, 9.8% over the past 12 months, exceeds that of the S&P 500, which typically ranges between 5% and 7%, says Huber.
High interest rates have also been a hurdle for this dividend-stock fund; investors can earn fatter yields in money market funds. But rates are likely to fall in the coming months, which may turn investor attention toward dividend stocks again, says Huber.
Meanwhile, Huber is nibbling in discounted sectors, including consumer staples, energy and healthcare. Coca-Cola (KO) is a "quality company," he says, "that trades at a price-earnings multiple you haven't seen in a really long time."
And since the collapse of oil prices during COVID, many energy stocks, including Conoco-Phillips (COP), yielding 2.9%, and Exxon Mobil (XOM), yielding 3.2%, have become smarter about how they spend their extra cash. He's also a fan of discount retailer Dollar General (DG), which is benefiting from consumers seeking relief from higher prices.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.
-
Three out of Four Retirees Say They’re OK Financially: Will You Be One of Them?
In a snapshot survey of views on retirement in the U.S., three in four retirees say they have enough money to live comfortably. Will you be able to say the same?
By Charlotte Gorbold Published
-
10 Bond Investments to Consider Before the Fed Cuts Rates
Why these picks for your bond portfolio are poised to help you get the biggest return in market conditions.
By Nellie S. Huang Published
-
10 Bond Portfolio Picks Before the Fed Cuts Rates
Why these picks for your bond portfolio are poised to help you get the biggest return in market conditions.
By Nellie S. Huang Published
-
For Lawyers, the Bar Exam Is More Than Just a Test
People who pass it within a few tries are proving they understand legal ethics and can handle pressure, advocate for consumers and communicate in writing.
By H. Dennis Beaver, Esq. Published
-
How AI Can Guide Introverts to Success in Professional Services
Fear of rejection and awkward conversations can keep accounting and law firms from realizing significant growth. AI can help with that.
By Timothy Keith Published
-
The Best Consumer Discretionary Stocks to Buy
Consumer discretionary stocks are a bet on the broader economy. But how do investors narrow the field to find the best ones to buy? We take a look here.
By Kyle Woodley Published
-
Stock Market Today: Dow Gains 484 Points in Broad-Market Bounce
Tech stocks were in focus Monday on news Palantir and Dell are two of the S&P 500's newest members.
By Karee Venema Published
-
Are Palantir and Dell Buys on Being Added to the S&P 500?
The S&P 500 is getting three new members this month but investors need to do their own due diligence.
By Dan Burrows Published
-
In Family Philanthropy, Embracing Differences Can Pay Off
Different approaches to charitable giving among generations and individuals can actually enhance the family's giving. Here's how.
By Julia Chu Published
-
Grow Your Investments Like Yale, Through a Self-Directed IRA
Yale's successful endowment focuses on alternatives. With a self-directed IRA, an individual investor could design a portfolio based on similar principles.
By Jason DeBono Published