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

If you've been stuck searching for Large Cap Blend funds, you might want to consider passing on by T. Rowe Price Dividend Growth Fund (PRDGX) as a possibility. PRDGX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

PRDGX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a 'buy and hold' mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRDGX. Since T. Rowe Price Dividend Growth Fund made its debut in December of 1992, PRDGX has garnered more than $12.42 billion in assets. The fund's current manager, Thomas J. Huber, has been in charge of the fund since March of 2000.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 11.82%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 13.34%, which places it in the bottom third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. The standard deviation of PRDGX over the past three years is 10.57% compared to the category average of 11.61%. The fund's standard deviation over the past 5 years is 13.34% compared to the category average of 13.24%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 0.83, so investors should note that it is hypothetically less volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. PRDGX's 5-year performance has produced a negative alpha of -1.12, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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 and it has an expense ratio of 0.65%.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

As a mutual fund with a 'sell' rank, PRDGX is in the bottom 40% of all funds we cover and it may be one to avoid putting on your short list of possible picks in Large Cap Blend. This fund from T. Rowe Price needs to turn around some of its key fundamental metrics such as the Zacks Ranks of its holdings, alpha, and performance in order for investors to consider T. Rowe Price Dividend Growth Fund in the future.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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