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Is T. Rowe Price Dividend Growth (PRDGX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research logoZacks Equity Research 2/22/2019 Zacks Equity Research

On the lookout for a Large Cap Blend fund? Starting with T. Rowe Price Dividend Growth (PRDGX) is one possibility. PRDGX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that PRDGX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a " buy and hold " mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRDGX. The T. Rowe Price Dividend Growth made its debut in December of 1992 and PRDGX has managed to accumulate roughly $6.19 billion in assets, as of the most recently available information. The fund is currently managed by Thomas J. Huber who has been in charge of the fund since March of 2000.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 10.89%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 13.6%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 9.91%, the standard deviation of PRDGX over the past three years is 9.82%. Looking at the past 5 years, the fund's standard deviation is 10.19% compared to the category average of 9.83%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. PRDGX lost 45.26% in the most recent bear market and outperformed its peer group by 4.06%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 0.89, which means it is hypothetically less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. PRDGX has generated a positive alpha over the past five years of 1.04, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

The mutual fund currently has 94.82% of its holdings in stocks, which have an average market capitalization of $171.09 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Industrial Cyclical
  4. Non-Durable
This fund's turnover is about 19.8%, so the fund managers are making fewer trades than its comparable peers.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PRDGX is a no load fund. It has an expense ratio of 0.64% compared to the category average of 0.96%. PRDGX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.

Bottom Line

Overall, T. Rowe Price Dividend Growth ( PRDGX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

Your research on the Large Cap Blend segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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