PRFDX
TRPrice Equity Income-Inv
A Strategic Approach to Dividend Income
The TRPrice Equity Income-Inv fund, ticker symbol PRFDX, is designed to provide investors with substantial dividend income alongside long-term capital growth. This fund primarily invests in the common stocks of well-established companies, ensuring that at least 80% of its net assets are allocated to these securities. Notably, 65% of these investments are in companies that pay above-average dividends, making it an attractive option for income-focused investors. The fund’s strategy aligns with its objective of equity-income, offering a blend of income and growth potential. Managed by T. Rowe Price, a reputable name in the investment world, PRFDX is a direct-sold share class, providing investors with a straightforward investment option without intermediary fees.
At A Glance
Executive Summary
PRFDX offers substantial dividend income and growth with a 0.68% expense ratio, focusing on established companies with above-average dividends.
Focus on high dividend income and growth. Invests in well-established companies. Lower beta indicates less volatility.
Negative alpha and Sharpe ratio. Higher expense ratio than some peers. Limited upside potential.
Performance Amidst Market Fluctuations
PRFDX has demonstrated a robust performance over the past year, with a one-year return of 29.36%. This performance, while impressive, is slightly below its benchmark, the S&P 500 Total Return Index, which posted a 37.62% return. Despite this, the fund’s focus on dividend-paying stocks has provided a stable income stream, with a yield of 1.85%. Over the long term, the fund has maintained competitive returns, with a five-year annualized return of 10.34% and a ten-year return of 9.06%. These figures highlight the fund’s ability to deliver consistent returns, making it a reliable choice for investors seeking both income and growth.
Portfolio Composition and Sector Allocation
The portfolio of PRFDX is diversified across various sectors, with a significant allocation to financials (20.63%), healthcare (16.93%), and industrials (12.65%). This sector allocation reflects the fund’s strategy of investing in large-cap value stocks that offer both stability and growth potential. The fund’s top holdings include Elevance Health Inc, Southern Co, and MetLife Inc, each contributing to the fund’s overall performance. The fund’s allocation to technology (10.41%) and energy (8.76%) sectors also provides exposure to growth-oriented industries, balancing the portfolio’s value focus. This strategic allocation ensures that the fund can capitalize on sector-specific growth opportunities while maintaining a stable income stream.
Risk Metrics and Volatility Analysis
PRFDX exhibits a relatively low beta of 0.72, indicating that it is less volatile than the broader market. This lower volatility is appealing to risk-averse investors who prioritize stability. However, the fund’s alpha is negative at -8.30%, suggesting that it has underperformed its benchmark on a risk-adjusted basis. The Sharpe ratio of -0.78 further indicates that the fund’s returns have not adequately compensated for the risk taken. Despite these metrics, the fund’s downside risk is relatively low, with a downside risk (UI) of 1.53 and a max drawdown of -5.1%. These figures suggest that while the fund may not outperform in bullish markets, it offers protection during downturns.
Comparative Analysis with Similar Funds
When compared to similar funds, PRFDX holds its ground with a competitive one-year return of 29.36%. For instance, Segall Bryant & Hamill AllCap-Inst (SBHAX) and Sit Dividend Growth-I (SDVGX) have one-year returns of 30.97% and 30.15%, respectively. However, PRFDX’s expense ratio of 0.68% is higher than these peers, which have expense ratios as low as 0.007%. Despite this, PRFDX’s focus on dividend income and its strategic sector allocation make it a compelling choice for investors seeking a balance of income and growth. The fund’s beta of 0.72 also suggests lower volatility compared to its peers, which may appeal to conservative investors.
Investor Suitability and Strategic Fit
PRFDX is particularly suitable for investors seeking a combination of income and growth through investments in large-cap value stocks. Its focus on well-established companies paying above-average dividends makes it an ideal choice for income-focused investors. The fund’s lower beta indicates reduced volatility, appealing to those who prefer a more stable investment. However, potential investors should be aware of the fund’s negative alpha and Sharpe ratio, which suggest that it may not outperform in all market conditions. Despite these considerations, PRFDX’s strategic sector allocation and consistent dividend income make it a valuable addition to a diversified portfolio.
Expense Ratio and Cost Efficiency
The expense ratio of PRFDX stands at 0.68%, which is relatively higher compared to some of its peers. This cost may be a consideration for cost-conscious investors, especially when compared to similar funds like Sit Dividend Growth-I (SDVGX) with an expense ratio of 0.007%. However, the fund’s focus on dividend income and its strategic allocation to well-established companies may justify the higher expense ratio for investors seeking stability and income. The fund’s direct-sold share class also eliminates intermediary fees, potentially offsetting some of the higher costs associated with its management.
Conclusion: A Balanced Choice for Income and Growth
In conclusion, PRFDX stands out as a balanced choice for investors seeking both income and growth. Its focus on large-cap value stocks and well-established companies paying above-average dividends aligns with its objective of providing substantial dividend income. While the fund’s performance metrics indicate some areas for improvement, its strategic sector allocation and lower volatility make it a reliable option for conservative investors. PRFDX is best suited for those who prioritize income and stability over aggressive growth, making it a valuable component of a diversified investment strategy.
Similar Securities
TRVLX: TRPrice Value-Inv | Undervalued Stock Investment for Growth
TRPrice Value-Inv excels with a 32.59% 1-year return, focusing on undervalued stocks with a 0.71% expense ratio.
LMVTX: ClearBridge Value-C | Value-Focused Growth Fund
LMVTX offers value-focused equity investments with a 1-year return of 33.24%, outperforming peers with a disciplined value strategy.
MADVX: BlackRock Equity Dividend-Inst | High-Yield Large Cap Value Fund
MADVX offers a 2.34% yield with a focus on dividend-paying large-cap stocks, underperforming its benchmark but providing stable income.
MALVX: BlackRock Advantage LargeCap Value-Inst | Growth-Focused Large Cap Value Fund
MALVX offers growth with a 0.54% expense ratio, focusing on large-cap value stocks, ideal for growth investors.
AMRMX: American Funds American Mutual-A | Growth and Income with Sustainable Dividends
AMRMX offers a balanced approach with a 0.59% expense ratio, focusing on sustainable dividends and large-cap value stocks for growth and income.
Futher Reading
https://finance.yahoo.com/quote/PRFDX/”>Yahoo: TRPrice Equity Income-Inv
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