Most income-based investors use a strategy involving purchasing shares on or before the company's ex-dividend date. On the ex-dividend date, the person who owns the security will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend. That said I wanted to not only consider these companies from an ex-dividend perspective, but demonstrate how both companies also outpace their competition in terms of profit margin.
T. Rowe Price (TROW), which closed trading on Monday at $634.25/share, will be going ex-dividend at the close of trading on Tuesday, September 11. The Baltimore, Maryland-based firm, which currently yields 2.10% ($1.36), is a publicly owned asset management holding company. The firm primarily provides its services to individual and institutional investors, retirement plans, and financial intermediaries. Through its subsidiaries, it manages separate client-focused equity, fixed income, and balanced portfolios. The firm also launches equity, fixed income, and balanced mutual funds for its clients. It invests in the public equity, fixed income, and venture capital markets across the globe.
In terms of TROW, there is one primary catalyst that potential income investors should find attractive and that is the company's profit margin when compared to some of its direct industry competitors. In the last 12 months, TROW has demonstrated an operating margin of 27.75%, whereas Morgan Stanley (MS) has only managed to demonstrate an operating margin of 8.29%. T. Rowe Price's profit margin is nearly 3.35 times that of Morgan Stanley's, which in my opinion is pretty impressive.
Ingersoll-Rand PLC (IR), which closed trading on Monday at $45.89/share, will be going ex-dividend at the close of trading on Tuesday, September 11. The Dublin, Ireland-based firm, which currently yields 1.40% ($0.64), engages in the design, manufacture, sale, and service of a diverse portfolio of industrial and commercial products in the United States and internationally. The company's Climate Solutions segment delivers refrigeration; and heating, ventilation, and air conditioning (HVAC) solutions. This segment offers a range of products, services, and solutions under the Thermo King and Trane brands to manage controlled temperature environments for transport and commercial HVAC markets. Its Residential Solutions segment provides mechanical and electronic locks, HVAC systems, indoor air quality solutions, advanced controls, portable security systems, and remote home management products under the American Standard, Schlage, and Trane names to homeowners in North America and South America.
When it comes to IR, potential investors should consider the company's profit margin when compared to some of its industry competitors and how the company outpaces those competitors. In the last 12 months, IR has demonstrated a profit margin of 5.49%, whereas Johnson Controls (JCI) has only managed to demonstrate a profit margin of 4.08%. That's a difference of 34.55% over the last 12 months, which I happen to find pretty attractive.
Potential investors looking to establish a position in TROW or IR should do so with a small to moderate position and add to that position as dividend announcements approach. Although the primary attraction comes in the form of dividend yield for both companies, one of the more important secondary catalysts to consider are clearly each company's profit margin and how they outpace some of their direct competitors.