Asset manager giant T. Rowe Price Group (TROW 0.45%) demonstrated its quality in the second quarter by topping analysts' revenue forecast and earnings per share expectations.

But does that mean it's a stock worth considering for your portfolio?

Let's delve into how T. Rowe Price was able to beat analyst predictions in its latest earnings report, whether that can continue in the future, and if the company is currently a buy.

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Surging investment advisory fees and disciplined cost management

T. Rowe Price's reported $1.93 billion in Q2 revenue works out to a 36.3% growth rate compared to the $1.42 billion generated in the year-ago period. The total was slightly above analysts' estimates of $1.88 billion.

The bulk of T. Rowe Price's revenue growth was the result of an uptick in investment advisory revenue, which comprised 93% of T. Rowe Price's net revenue for the quarter. T. Rowe Price's investment advisory fees are largely dependent on the total value and composition of assets under management, or AUM, according to the company's recent 10-K filing. They also tend to dictate the company's operating results.

T. Rowe Price's average AUM grew 39% year over year to $1.59 trillion as the broader market has rallied from last year amid investor optimism. This strong growth led to the 38.1% year-over-year spike in investment advisory fees, which totaled $1.79 billion in Q2.

As one of the largest asset managers in the world, T. Rowe Price benefits tremendously from size and scale. As the company's revenue base increases, its operating expenses typically don't increase as fast. The company's operating expenses increased 12.7% year over year to $971 million in Q2 2021, but the rise was nowhere near the revenue gains that were created.

Further market upside is a tailwind

T. Rowe Price was able to generate $3.31 in adjusted diluted EPS in Q2 2021 ($0.15 higher than the analyst estimate of $3.16) against the $2.29 reported in Q2 2020. That represents a whopping 44.5% year-over-year growth rate.

That Q2 performance stands out as a positive, but can the company's operating fundamentals remain strong in the future?

A J.P. Morgan analyst report last month raised the year-end target for the S&P 500 index from 4,400 to 4,600, citing improving fundamentals in the labor market and record household savings. That price target implies a 4% upside from where the index was trading on Aug. 10. That additional market growth should help drive T. Rowe Price's AUM and investment advisory fees higher in the next two quarters to close out this year.

No long-term debt and ample cash

In a low-interest-rate environment that has tempted many companies to borrow tons of cheap capital for share buybacks and investment to create future growth, T. Rowe Price has steered clear of new debt generation entirely.

T. Rowe Price had no long-term debt in Q2. Even more encouraging was that the company was able to grow its cash balance from $2.8 billion in Q1 2021 to $3.5 billion in Q2 2021. With a market capitalization of $48 billion, that means the company is sitting on a cash pile that is 7% of its market cap.

This fortress-like balance sheet allowed T. Rowe Price to raise its quarterly dividend 20% earlier this year as well as pay out a $3 per share special dividend in June.

Given T. Rowe Price's steady operating fundamentals and commitment to returning capital to its shareholders, it's likely that the company's generous shareholder policies will continue going forward.

A quality dividend stock worth your attention

Macroeconomic conditions and T. Rowe Price's second-quarter operating results suggest the company's strong fundamentals are likely to continue. T. Rowe Price's absence of long-term debt and abundance of cash on its balance sheet should result in nice returns of capital to shareholders going forward.

The company's safe 2% dividend yield offers income investors immediate income much higher than the S&P 500's average 1.3% yield while also playing the broader economic recovery that is in progress. 

T. Rowe Price's trailing-12-months price-to-earnings ratio of 17.2 is just above its 13-year median of 17, which is a reasonable price given that the company's earnings growth potential remains as strong now as it has been in recent years. Even though T. Rowe Price has experienced a rally in its stock price over the past week following its earnings report, the stock is still trading right around its fair value, making it a solid buy for dividend investors.