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How This Dividend Fund Protects the Downside

A tilt away from energy and tech helps propel Silver-rated T. Rowe Price Dividend Growth's superior performance during market turbulence.


Robby Greengold: T. Rowe Price Dividend Growth is an excellent option for income-focused investors comfortable with modest upside potential relative to the broad equity market but who are looking for outstanding downside protection.

This is a Silver-rated fund with several positive attributes. Portfolio manager Tom Huber has been at the helm a long time--nearly 20 years now--and during that time he's consistently followed a patient, low-turnover approach that focuses mostly on dividend-paying firms that are financially healthy enough to sustain or grow their payouts. He looks for companies with durable competitive advantages, ample cash flow, and management teams that allocate capital with shareholders' interests in mind, whether that's through dividends or buybacks.

Huber's criteria has tended to tilt the portfolio away from commodity-oriented areas of the market, such as energy, and away from tech stocks, which often don't pay dividends. (The technology underweight explains much of the fund's recent underperformance versus the S&P 500.) Over the long haul, the fund's superior performance during turbulent environments has buoyed its relative returns.

The portfolio manager is an industry veteran, but he doesn't rely only on his own expertise. He has access to a plethora of resources at T. Rowe Price, including a solid global analyst team that includes more than 100 professionals.

Along with all this, the fund is attractively priced. It should continue to serve long-term investors well.

Robby Greengold does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.