T. Rowe Price
Baltimore-based asset manager T. Rowe Price (TROW) is posting decent performance this year, buoyed by an equity rally in 2012 that's helped to grow TROW's assets under management -- and its fees. Now, with stellar profitability and ample cash on hand, the company looks well positioned to post a bigger dividend for investors in the next quarter. Right now, T. Rowe pays a 34-cent quarterly payout for a 2.14% yield.
For full disclosure, I like T. Rowe Price -- my first job was at the investment firm. Then and now, T. Rowe Price is evidence that brand matters in the asset management business. In an industry where investors are rightfully suspicious of their investment managers, T. Rowe prides itself on being a good steward for its clients. Managers use conservative strategies, even when exciting trends are spurring reactions at rivals. That means that T. Rowe Price tends to lag fad rallies, but it also means that the firm was able to protect customer money much better than most peers during the Great Recession.
T. Rowe Price's approach has won out in the long-term -- close to 80% of funds are outperforming the rest of the industry over the last decade. As anxious investors give more money to TROW, the firm's fee generation should continue to grow faster than the industry. Just as importantly, outsized exposure to equities means that the firm should benefit disproportionately if this stock rally continues in 2013.McGraw-Hill Companies McGraw-Hill Companies (MHP) is another stock that looks primed to boost its dividend payout. The $14 billion publishing firm currently pays a 25.5-cent quarterly dividend to investors, but that number should increase in the next quarter as MHP slowly recovers from the recession. Right now, McGraw-Hill's payout adds up to a 2% yield. MHP isn't a conventional publisher. Instead, its focus is in providing higher-value content and research through subsidiaries like J.D. Power and Associates, Standard & Poor's, and its namesake educational publishing arm. MHP's focus on trade and education means that higher costs go into creating products, but it also means that the firm can demand bigger prices for its trouble. That's helped to ensure that net margins come in at around 15%, versus tenuous profitability for conventional publishing companies.
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