Dividend Growth Fund Dividend Growth Fund Advisor Class Dividend Growth Fund I Class

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1 ANNual REPORT December 31, 2017 PRDGX TADGX PDGIX T. Rowe Price Dividend Growth Fund Dividend Growth Fund Advisor Class Dividend Growth Fund I Class The fund invests in stocks that are likely to raise their dividend payouts over time.

2 HIGHLIGHTS The Dividend Growth Fund returned 19.32% for the 12-month reporting period, slightly underperforming its S&P 500 Index benchmark and the Lipper Large-Cap Core Funds Index. Health care was the strongest contributor on an absolute and relative basis due to stock selection and an overweight position in the sector. Information technology stocks contributed to absolute returns but detracted the most from relative performance due to our large underweight to the sector, the strongest performer in the S&P 500. We believe that dividend growth stocks are well positioned in the current growth environment that features potentially higher interest rates and inflation. We remain focused on companies with healthy balance sheets and cash flows, and we continue to buy and hold high-quality companies that can demonstrate growth in earnings and dividends. The views and opinions in this report were current as of December 31, They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects. REPORTS ON THE WEB Sign up for our Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log in to your account at troweprice.com for more information.

3 Manager s Letter Fellow Shareholders Your portfolio performed better in the first half of 2017 than the second half, when the market was driven by growth companies and a willingness to take on more risk. This portfolio is more conservatively positioned than the benchmark S&P 500 Index, and style lagged slightly from relative performance amid a risk-on environment. However, stock selection was solid, yield-generating stocks performed well on an absolute basis, and our process remained consistent. We believe that our emphasis on durable and sustainable growth companies in which dividends remain an important component of total return will continue to serve shareholders well over market cycles. A sign of the health of the companies that we own is partially reflected in our dividend growth rate, which is compounding well above the market s dividend growth rate. PERFORMANCE REVIEW Performance Comparison Total Return Periods Ended 12/31/17 6 Months 12 Months Dividend Growth Fund 9.05% 19.32% Dividend Growth Fund Advisor Class Dividend Growth Fund I Class S&P 500 Index Lipper Large-Cap Core Funds Index The fund returned 19.32% for the 12-month period ended December 31, (Results for the Advisor and I Class shares varied, reflecting their different expense ratios.) For the year, your fund underperformed its primary benchmark, the S&P 500 Index, and its Lipper peer group index, which returned 21.83% and 21.63%, respectively, due, in part, to sector allocation decisions. 1

4 Health care was the largest contributor to absolute and relative performance due to stock selection and our overweight position in the sector. The fund s information technology stocks were another large contributor on an absolute basis, but they accounted for the biggest detraction on a relative basis due to our large underweight to the sector. Energy stocks performed well on a relative basis due to stock selection and our significant underweight in the sector, but these stocks contributed the least on an absolute basis because our exposure to the rising sector in the second half of the year was limited. The fund s Board of Directors declared a fourth-quarter dividend of $0.16 per share ($0.13 and $0.18 per share for the fund s Advisor and I Class shares, respectively) on December 12, Dividend distributions for all of 2017 totaled $0.53 per share ($0.41 and $0.58 per share for the fund s Advisor and I Class shares, respectively). Shareholders should have already received a check or statement reflecting the fourth-quarter distribution. MARKET REVIEW The S&P 500 Index ended 2017 close to the record high reached earlier in December, joining other global stock benchmarks that finished at or near record highs. While U.S. stock growth outpaced most other major developed global markets, the world s economies experienced a broadly synchronized upswing. The U.S. Federal Reserve raised interest rates three times during the year, a clear indication of strengthening economic growth, although inflation remained low. Growth stocks widely outpaced value stocks across all market capitalizations, according to various Russell indexes. In the S&P 500 Index, nine of 11 sectors advanced and two fell. It is not unusual for dividend-paying stocks to trail the broad market early in a rate hiking cycle, as investors favor companies that are more leveraged to a pickup in economic growth (dividend payers are generally viewed as more defensive businesses). PORTFOLIO PERFORMANCE AND STRATEGY Our financial holdings, which compose one of our largest overweights relative to the S&P 500, are leveraged to an improving U.S. economy and higher interest rates. The election of Donald Trump and his successful effort to implement lower corporate tax legislation 2

5 Sector Diversification Percent of Net Assets 6/30/17 12/31/17 Financials 17.2% 17.6% Health Care Information Technology Industrials and Business Services Consumer Discretionary Consumer Staples Utilities Energy Materials Real Estate Telecommunication Services Other and Reserves Total 100.0% 100.0% Historical weightings reflect current industry/sector classifications. strengthened our thesis that financial stocks have much to benefit from tax reform. Within the diverse financials sector, we focus on better-capitalized, higher-return businesses. JPMorgan Chase and Wells Fargo were notable additions to the portfolio and, along with Morgan Stanley and Bank of New York Mellon, performed well. Both JPMorgan Chase and Wells Fargo are stocks that are well positioned across their business lines, and we added to them earlier in the year at a discount relative to their peers. We eliminated Northern Trust for a better idea, First Republic Bank, a growing regional bank that caters to a younger clientele and that we believe can retain and grow with their customers. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) Within financials, we have large positions in global insurers, as we believe that many of these companies can benefit from rising insurance premiums. Marsh & McLennan and Aon were good performers. Both are good businesses characterized by consistent earnings and cash flow growth, the type of quality companies that typify our portfolio. During the second half of the year, we also added to other insurers, including Chubb, Willis Tower Watson, and American International Group, on weakness. Our overweight in health care is attributed to our continuing belief that these stocks are the most attractive of the traditionally defensive sectors that also offer a good combination of growth at a reasonable price. Our health care stocks total about 17% of the fund s 3

6 assets and reflect names that can perform well in most economic environments. Our health care holdings are leaders in innovation, developing products and services to improve care and help manage costs. Our largest industry weight is within health care equipment and supplies, including Becton, Dickinson & Company; Agilent Technologies; and Stryker, which were all strong contributors on a relative basis. We also maintain a large position in pharmaceuticals, including solid performers Pfizer, Zoetis, and Johnson & Johnson. Managed care provider UnitedHealth Group was another strong absolute contributor within the sector that has benefited from solid quarterly earnings and expectations of continued growth in its businesses. Not all of our health care picks were winners in We eliminated our position in drugmaker McKesson, partly due to expected headwinds on its earnings growth, and Merck, for similar reasons. While the information technology sector remains our largest underweight relative to the benchmark, it was one of our biggest absolute contributors though a large relative performance detractor due to our underweight. (Information technology was by far the best-performing sector in the S&P 500 for all of 2017, rising nearly 39%.) We have long been underweight to the information technology sector due to its inherent volatility and the threat of new entrants disrupting established businesses. We have not changed our thinking, and despite the runup in information technology stocks in 2017, the portfolio s information technology stocks composed about 14% of the assets and did not significantly change throughout the period. The stock picks we include are mostly concentrated in software and services that can benefit from the increasing demand for business technology solutions. These are largely recurring revenue businesses that offer durability that we look for. Where we saw opportunity, we added exposure to the sector, especially in the final quarter of the period. We added to Apple, which could benefit from repatriation of its large overseas stockpile of cash that could be shifted toward shareholders under the newly passed U.S. corporate tax reform rules. In addition, we believe the stock was trading at a relative discount versus its peers. We also added to our position in Accenture and Texas Instruments, which both performed well. Visa was one of our strongest contributors as it continues to benefit from the transition in payments from cash. 4

7 On a relative basis, the fund benefited from our underweights in energy, telecommunication services, and real estate, but overweighting the utilities, consumer staples, and industrials and business services sectors detracted. Microsoft, our largest holding, was the period s best absolute performance contributor, while GE, which we eliminated, was the biggest absolute detractor. INVESTMENT OUTLOOK The passage of corporate tax and financial regulatory reform has brought a sense of optimism and stronger business sentiment to the market, which is strong out of the gate as we enter Our holdings of domestic companies, particularly financials and retailers and some within health care, would likely benefit the most from tax reform. We expect companies will return a portion of their cash savings from lower taxes to shareholders. While we welcome corporate tax reform and other policies that support a higher-growth environment, those measures are not driving our investment process. Valuations across the market appear increasingly stretched as result of the past year s rally, making it challenging to find companies that can demonstrate growth in earnings and dividends in the current environment. Despite our concerns about elevated valuations, we do not see many significant near-term risks, aside from surprises such as geopolitical disruptions, natural disasters, and the like. We believe that earnings growth will be the main driver of stock performance in the coming months. But a healthy dose of more of the same is generally reflective of our sentiment as we enter Nonetheless, we are prepared for a changing economic and business environment. The types of businesses we favor are characterized by durable earnings, strong cash flows, and healthy dividend payments. These companies do not always lead in strong market environments but traditionally perform well when economic conditions are not robust. We can t predict when conditions will deteriorate, but we remain confident that dividend growers are well positioned for this more uncertain environment featuring potentially higher interest rates and inflation. 5

8 Respectfully submitted, Thomas J. Huber President of the fund and chairman of its Investment Advisory Committee January 22, 2018 The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund s investment program. 6

9 Risks of Stock Investing A fund s share price can fall because of weakness in the stock or bond markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, the investment manager s assessment of companies held in a fund may prove incorrect, resulting in losses or poor performance even in rising markets. Funds investing in stocks with a dividend orientation may have somewhat lower potential for price appreciation than those concentrating on rapidly growing firms. Also, a company may reduce or eliminate its dividend. Glossary Dividend yield: The annual dividend of a stock divided by the stock s price. Free cash flow: The excess cash a company generates from its operations that can be taken out of the business for the benefit of shareholders, such as dividends, share repurchases, investments, and acquisitions. Lipper indexes: Fund benchmarks that consist of a small number (10 to 30) of the largest mutual funds in a particular category as tracked by Lipper Inc. S&P 500 Index: An unmanaged index that tracks the stocks of 500 primarily large-capitalization U.S. companies. 7

10 Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 12/31/17 Microsoft 3.1% JPMorgan Chase 3.0 UnitedHealth Group 2.6 Visa 2.3 Wells Fargo 2.1 Becton, Dickinson & Company 2.0 Apple 2.0 Danaher 2.0 Thermo Fisher Scientific 1.8 Pfizer 1.7 PepsiCo 1.6 Bank of New York Mellon 1.5 Comcast 1.5 Accenture 1.5 Roper Technologies 1.5 U.S. Bancorp 1.4 Honeywell International 1.4 Marsh & McLennan 1.4 ExxonMobil 1.3 Chubb 1.2 Illinois Tool Works 1.2 Occidental Petroleum 1.2 Texas Instruments 1.2 Dollar General 1.2 Crown Castle International 1.2 Total 42.9% Note: The information shown does not reflect any exchange-traded funds (ETFs), cash reserves, or collateral for securities lending that may be held in the portfolio. 8

11 Portfolio Highlights MAJOR PORTFOLIO CHANGES Listed in descending order of size. Six Months Ended 12/31/17 Largest Purchases American International Group* TransCanada ExxonMobil Tyson Foods* CVS Health* Southern Company Stanley Black & Decker Sempra Energy* Yum! Brands McCormick Largest Sales Walgreens Boots Alliance GE** Enbridge** Comcast Edison International Morgan Stanley Rockwell Collins Johnson Controls International Philip Morris International Home Depot * Position added. ** Position eliminated. 9

12 Performance and Expenses Growth of $10,000 This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. DIVIDEND GROWTH FUND $35,000 30,000 25,000 20,000 15,000 10,000 As of 12/31/17 Dividend Growth Fund $22,637 S&P 500 Index $22,603 Lipper Large-Cap Core Funds Index $20,896 12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 Note: Performance for the Advisor and I Classes will vary due to their differing fee structures. See returns table below. Average Annual Compound Total Return Since Inception Periods Ended 12/31/17 1 Year 5 Years 10 Years Inception Date Dividend Growth Fund 19.32% 14.83% 8.51% Dividend Growth Fund Advisor Class Dividend Growth Fund I Class % 12/17/15 Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance, please visit our website (troweprice.com) or contact a T. Rowe Price representative at or, for Advisor and I Class shares, This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. When assessing performance, investors should consider both short- and long-term returns. 10

13 Expense Ratio Dividend Growth Fund 0.64% Dividend Growth Fund Advisor Class 0.91 Dividend Growth Fund I Class 0.51 The expense ratio shown is as of the fund s fiscal year ended 12/31/16. This number may vary from the expense ratio shown elsewhere in this report because it is based on a different time period and, if applicable, includes acquired fund fees and expenses but does not include fee or expense waivers. Fund Expense Example As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period. Please note that the fund has three share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, the Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee, and I Class shares are available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. Each share class is presented separately in the table. Actual Expenses The first line of the following table (Actual) provides information about actual account values and expenses based on the fund s actual returns. You may use the information on this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number on the first line under the heading Expenses Paid During Period to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The information on the second line of the table (Hypothetical) is based on hypothetical account values and expenses derived from the fund s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. 11

14 Fund Expense Example (continued) Note: T. Rowe Price charges an annual account service fee of $20, generally for accounts with less than $10,000. The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Personal Services or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $250,000). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher. Dividend Growth Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 7/1/17 12/31/17 7/1/17 to 12/31/17 Investor Class Actual $1, $1, $3.37 Hypothetical (assumes 5% return before expenses) 1, , Advisor Class Actual 1, , Hypothetical (assumes 5% return before expenses) 1, , I Class Actual 1, , Hypothetical (assumes 5% return before expenses) 1, , * Expenses are equal to the fund s annualized expense ratio for the 6-month period, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.64%, the Advisor Class was 0.91%, and the I Class was 0.51%. 12

15 Financial Highlights For a share outstanding throughout each period Investor Class Year Ended 12/31/17 12/31/16 12/31/15 12/31/14 12/31/13 NET ASSET VALUE Beginning of period $ $ $ $ $ Investment activities Net investment income (1) Net realized and unrealized gain / loss Total from investment activities Distributions Net investment income (0.53) (0.57) (0.61) (0.47) (0.41) Net realized gain (0.42) (0.57) (1.99) (1.16) (0.22) Total distributions (0.95) (1.14) (2.60) (1.63) (0.63) NET ASSET VALUE End of period $ $ $ $ $ Ratios/Supplemental Data Total return (2) 19.32% 11.62% 2.36% 12.34% 30.35% Ratio of total expenses to average net assets 0.64% 0.64% 0.64% 0.65% 0.66% Ratio of net investment income to average net assets 1.29% 1.68% 1.70% 1.33% 1.37% Portfolio turnover rate 15.5% 11.3% 24.6% 18.6% 12.7% Net assets, end of period (in millions) $ 6,249 $ 5,349 $ 4,437 $ 4,360 $ 3,823 (1) Per share amounts calculated using average shares outstanding method. (2) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. The accompanying notes are an integral part of these financial statements. 13

16 Financial Highlights For a share outstanding throughout each period Advisor Class Year Ended 12/31/17 12/31/16 12/31/15 12/31/14 12/31/13 NET ASSET VALUE Beginning of period $ $ $ $ $ Investment activities Net investment income (1) Net realized and unrealized gain / loss Total from investment activities Distributions Net investment income (0.41) (0.49) (0.51) (0.37) (0.33) Net realized gain (0.42) (0.57) (1.99) (1.16) (0.22) Total distributions (0.83) (1.06) (2.50) (1.53) (0.55) NET ASSET VALUE End of period $ $ $ $ $ Ratios/Supplemental Data Total return (2) 19.03% 11.33% 2.08% 12.07% 29.96% Ratio of total expenses to average net assets 0.91% 0.91% 0.91% 0.91% 0.93% Ratio of net investment income to average net assets 1.01% 1.45% 1.43% 1.06% 1.10% Portfolio turnover rate 15.5% 11.3% 24.6% 18.6% 12.7% Net assets, end of period (in thousands) $ 366,012 $ 350,863 $ 229,291 $ 258,253 $ 252,974 (1) Per share amounts calculated using average shares outstanding method. (2) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. The accompanying notes are an integral part of these financial statements. 14

17 Financial Highlights For a share outstanding throughout each period I Class Year Ended 12/31/17 12/31/16 12/17/15 (1) Through 12/31/15 NET ASSET VALUE Beginning of period $ $ $ Investment activities Net investment income (2) (3) Net realized and unrealized gain / loss Total from investment activities Distributions Net investment income (0.58) (0.62) Net realized gain (0.42) (0.57) Total distributions (1.00) (1.19) NET ASSET VALUE End of period $ $ $ Ratios/Supplemental Data Total return (4) 19.47% 11.74% 0.29% (3) Ratio of total expenses to average net assets 0.51% 0.51% 0.54% (3)(5) Ratio of net investment income to average net assets 1.43% 2.12% 1.29% (3)(5) Portfolio turnover rate 15.5% 11.3% 24.6% Net assets, end of period (in millions) $ 2,187 $ 1,235 $ 251 (6) (1) Inception date (2) Per share amounts calculated using average shares outstanding method. (3) See Note 5. Excludes expenses in excess of a 0.05% contractual operating expense limitation in effect through 4/30/18. (4) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. Total return is not annualized for periods less than one year. (5) Annualized (6) Amount shown is in thousands. The accompanying notes are an integral part of these financial statements. 15

18 December 31, 2017 Portfolio of Investments Shares $ Value (Cost and value in $000s) COMMON STOCKS 95.2% CONSUMER DISCRETIONARY 11.1% Hotels, Restaurants & Leisure 3.4% Carnival (1) 484,800 32,176 Hilton Worldwide Holdings 640,600 51,159 Marriott, Class A 569,391 77,284 McDonald's 137,800 23,718 MGM Resorts International 1,134,600 37,884 Yum! Brands 971,000 79, ,464 Media 3.6% Comcast, Class A (1) 3,333, ,499 Omnicom (1) 724,800 52,787 Time Warner (1) 299,066 27,356 Twenty-First Century Fox, Class A (1) 1,585,200 54,737 Walt Disney (1) 440,800 47, ,769 Multiline Retail 1.2% Dollar General 1,129, , ,008 Specialty Retail 2.7% Home Depot 518,800 98,328 L Brands (1) 750,500 45,195 Ross Stores 861,700 69,151 Tractor Supply (1) 289,200 21, ,292 Textiles, Apparel & Luxury Goods 0.2% Nike, Class B (1) 347,800 21,755 21,755 Total Consumer Discretionary 978,288 16

19 (Cost and value in $000s) CONSUMER STAPLES 8.7% Shares $ Value Beverages 3.3% Coca-Cola (1) 965,900 44,315 Diageo (GBP) 1,257,635 46,098 Dr Pepper Snapple (1) 616,800 59,867 PepsiCo 1,154, , ,704 Food & Staples Retailing 1.0% Costco Wholesale (1) 145,200 27,024 CVS Health 499,788 36,235 Walgreens Boots Alliance (1) 337,500 24,509 87,768 Food Products 2.8% General Mills (1) 303,800 18,012 McCormick (1) 373,500 38,064 Mondelez International (1) 2,072,751 88,714 Nestle (CHF) 646,857 55,614 Tyson Foods, Class A (1) 577,600 46, ,230 Household Products 0.5% Colgate-Palmolive 527,100 39,770 39,770 Tobacco 1.1% Philip Morris International 931,500 98,413 98,413 Total Consumer Staples 761,885 ENERGY 4.1% Oil, Gas & Consumable Fuels 4.1% Canadian Natural Resources 1,327,600 47,422 17

20 (Cost and value in $000s) Shares $ Value ExxonMobil (1) 1,394, ,603 Occidental Petroleum 1,451, ,895 TransCanada 1,876,300 91,263 Total Energy 362,183 FINANCIALS 17.6% Banks 6.9% First Republic Bank 368,759 31,949 JPMorgan Chase 2,467, ,821 U.S. Bancorp (1) 2,353, ,085 Wells Fargo 2,992, , ,428 Capital Markets 4.3% Bank of New York Mellon 2,481, ,632 Morgan Stanley 887,800 46,583 S&P Global 196,900 33,355 State Street 1,023,700 99,923 TD Ameritrade Holding 1,296,215 66, ,768 Consumer Finance 0.5% American Express 449,000 44,590 44,590 Insurance 5.9% American International Group (1) 975,500 58,120 Aon (1) 597,300 80,038 Chubb 742, ,512 Marsh & McLennan 1,466, ,334 Progressive 1,175,100 66,182 Willis Towers Watson 353,200 53,224 18

21 (Cost and value in $000s) Shares $ Value XL Group (1) 1,085,552 38, ,578 Total Financials 1,551,364 HEALTH CARE 17.2% Health Care Equipment & Supplies 6.7% Becton, Dickinson & Company 842, ,333 Danaher 1,851, ,856 Dentsply Sirona (1) 755,050 49,705 Medtronic 1,117,278 90,220 Stryker 661, , ,525 Health Care Providers & Services 3.2% Cigna 277,750 56,408 UnitedHealth Group 1,029, , ,328 Life Sciences Tools & Services 2.8% Agilent Technologies 1,302,500 87,228 Thermo Fisher Scientific 823, , ,556 Pharmaceuticals 4.5% Johnson & Johnson 601,200 84,000 Merck 1,332,600 74,985 Pfizer 4,217, ,769 Zoetis 1,151,400 82, ,701 Total Health Care 1,516,110 INDUSTRIALS & BUSINESS SERVICES 11.5% Aerospace & Defense 1.2% Rockwell Collins (1) 379,500 51,468 19

22 (Cost and value in $000s) Shares $ Value United Technologies (1) 387,700 49, ,927 Air Freight & Logistics 1.1% C.H. Robinson Worldwide (1) 511,200 45,543 UPS, Class B (1) 414,800 49,423 94,966 Building Products 0.9% Johnson Controls International 1,991,072 75,880 75,880 Commercial Services & Supplies 0.8% Waste Connections 1,043,063 73,995 73,995 Industrial Conglomerates 2.8% Honeywell International 788, ,878 Roper Technologies 497, , ,679 Machinery 3.3% Fortive 924,200 66,866 Illinois Tool Works (1) 642, ,251 PACCAR 489,600 34,801 Stanley Black & Decker 492,000 83, ,405 Professional Services 0.6% Equifax (1) 436,525 51,475 51,475 Road & Rail 0.8% Union Pacific 514,575 69,004 69,004 Total Industrials & Business Services 1,008,331 20

23 (Cost and value in $000s) INFORMATION TECHNOLOGY 14.1% Shares $ Value Communications Equipment 0.7% Cisco Systems (1) 1,528,700 58,549 58,549 Electronic Equipment, Instruments & Components 0.8% TE Connectivity 732,300 69,598 69,598 IT Services 5.3% Accenture, Class A (1) 861, ,857 Automatic Data Processing 469,100 54,974 Fidelity National Information 876,197 82,441 Visa, Class A 1,758, , ,753 Semiconductors & Semiconductor Equipment 2.2% Microchip Technology 496,100 43,597 Texas Instruments 1,013, ,850 Xilinx 581,494 39, ,652 Software 3.1% Microsoft 3,200, , ,796 Technology Hardware, Storage & Peripherals 2.0% Apple 1,043, , ,558 Total Information Technology 1,236,906 MATERIALS 4.1% Chemicals 3.0% Air Products & Chemicals (1) 550,300 90,293 Ecolab (1) 122,200 16,397 21

24 (Cost and value in $000s) Shares $ Value PPG Industries 168,400 19,672 Praxair 214,000 33,102 RPM (1) 1,297,800 68,031 Sherwin-Williams 77,600 31, ,314 Containers & Packaging 1.1% Ball 2,599,000 98,372 98,372 Total Materials 357,686 REAL ESTATE 2.5% Equity Real Estate Investment Trusts 2.5% American Tower, REIT 640,700 91,409 Crown Castle International, REIT (1) 941, ,560 Equity Residential, REIT 426,300 27,185 Total Real Estate 223,154 UTILITIES 4.3% Electric Utilities 2.5% Edison International (1) 806,100 50,978 NextEra Energy 623,900 97,447 Southern Company (1) 1,450,900 69, ,199 Gas Utilities 0.8% Atmos Energy 893,466 76,740 76,740 Multi-Utilities 1.0% DTE Energy (1) 521,720 57,107 22

25 (Cost and value in $000s) Shares $ Value Sempra Energy 279,002 29,831 86,938 Total Utilities 381,877 Total Common Stocks (Cost $5,301,148) 8,377,784 SHORT-TERM INVESTMENTS 4.9% Money Market Funds 4.9% T. Rowe Price Government Reserve Fund, 1.24% (2)(3) 430,621, ,622 Total Short-Term Investments (Cost $430,622) 430,622 SECURITIES LENDING COLLATERAL 2.4% Investments in a Pooled Account through Securities Lending Program with State Street Bank and Trust Company 2.4% Money Market Funds 2.4% T. Rowe Price Short-Term Fund, 1.49% (2)(3) 21,693, ,936 Total Investments through Securities Lending Program with State Street Bank and Trust Company 216,936 Total Securities Lending Collateral (Cost $216,936) 216,936 Total Investments in Securities 102.5% of Net Assets (Cost $5,948,706) $ 9,025,342 Shares are denominated in U.S. dollars unless otherwise noted. (1) All or a portion of this security is on loan at December 31, total value of such securities at period-end amounts to $210,893. See Note 3. (2) Seven-day yield (3) Affiliated Company CHF Swiss Franc GBP British Pound REIT A domestic Real Estate Investment Trust whose distributions pass-through with original tax character to the shareholder 23

26 Affiliated Companies ($000s) The fund may invest in certain securities that are considered affiliated companies. As defined by the 1940 Act, an affiliated company is one in which the fund owns 5% or more of the outstanding voting securities, or a company that is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the year ended December 31, Net realized gain (loss), investment income, change in net unrealized gain/loss, and purchase and sales cost reflect all activity for the period then ended. Affiliate Net Realized Gain (Loss) Change in Net Unrealized Gain/Loss Investment Income T. Rowe Price Government Reserve Fund $ $ $ 3,553 T. Rowe Price Short-Term Fund ++ Totals $ # $ $ 3,553+ Supplementary Investment Schedule Value Affiliate 12/31/16 Purchase Cost Sales Cost Value 12/31/17 T. Rowe Price Government Reserve Fund $ 360,340 $ 430,622 T. Rowe Price Short-Term Fund 40, ,936 $ 647,558^ # Capital gain/loss distributions from mutual funds represented $0 of the net realized gain (loss). ++ Excludes earnings on securities lending collateral, which are subject to rebates and fees as described in Note 3. + Investment income comprised $3,553 of dividend income and $0 of interest income. Purchase and sale information not shown for cash management funds. ^ The cost basis of investments in affiliated companies was $647,558. The accompanying notes are an integral part of these financial statements. 24

27 December 31, 2017 Statement of Assets and Liabilities ($000s, except shares and per share amounts) Assets Investments in securities, at value (cost $5,948,706) $ 9,025,342 Receivable for shares sold 18,582 Dividends receivable 14,475 Receivable for investment securities sold 1,108 Other assets 438 Total assets 9,059,945 Liabilities Obligation to return securities lending collateral 216,936 Payable for shares redeemed 32,255 Investment management fees payable 3,642 Payable for investment securities purchased 3,531 Due to affiliates 255 Payable to directors 6 Other liabilities 805 Total liabilities 257,430 NET ASSETS $ 8,802,515 Net Assets Consist of: Undistributed net investment income $ 877 Accumulated undistributed net realized gain 2,443 Net unrealized gain 3,076,652 Paid-in capital applicable to 202,917,521 shares of $ par value capital stock outstanding; 1,000,000,000 shares authorized 5,722,543 NET ASSETS $ 8,802,515 25

28 December 31, 2017 Statement of Assets and Liabilities NET ASSET VALUE PER SHARE Investor Class ($6,249,397,166 / 144,045,162 shares outstanding) $ Advisor Class ($366,012,059 / 8,445,733 shares outstanding) $ I Class ($2,187,105,937 / 50,426,626 shares outstanding) $ The accompanying notes are an integral part of these financial statements. 26

29 Statement of Operations ($000s) Investment Income (Loss) Year Ended 12/31/17 Income Dividend $ 152,285 Securities lending 71 Total income 152,356 Expenses Investment management 38,612 Shareholder servicing Investor Class $ 7,755 Advisor Class 560 I Class 12 8,327 Rule 12b-1 fees Advisor Class 907 Prospectus and shareholder reports Investor Class 292 Advisor Class 18 I Class Custody and accounting 294 Registration 488 Legal and audit 29 Directors 24 Miscellaneous 29 Total expenses 49,150 Net investment income 103,206 27

30 Statement of Operations ($000s) Year Ended 12/31/17 Realized and Unrealized Gain / Loss Net realized gain (loss) Securities 107,997 Foreign currency transactions (10) Net realized gain 107,987 Change in net unrealized gain / loss Securities 1,181,330 Other assets and liabilities denominated in foreign currencies 29 Change in net unrealized gain / loss 1,181,359 Net realized and unrealized gain / loss 1,289,346 INCREASE IN NET ASSETS FROM OPERATIONS $ 1,392,552 The accompanying notes are an integral part of these financial statements. 28

31 Statement of Changes in Net Assets ($000s) Increase (Decrease) in Net Assets Year Ended 12/31/17 12/31/16 Operations Net investment income $ 103,206 $ 95,218 Net realized gain 107, ,203 Change in net unrealized gain / loss 1,181, ,961 Increase in net assets from operations 1,392, ,382 Distributions to shareholders Net investment income Investor Class (76,492) (77,630) Advisor Class (3,612) (4,326) I Class (24,916) (12,146) Net realized gain Investor Class (60,527) (79,706) Advisor Class (3,517) (5,291) I Class (20,051) (16,991) Decrease in net assets from distributions (189,115) (196,090) Capital share transactions* Shares sold Investor Class 1,606,014 2,169,390 Advisor Class 92, ,858 I Class 975,058 1,307,556 Distributions reinvested Investor Class 123, ,476 Advisor Class 7,125 9,616 I Class 44,061 28,775 Shares redeemed Investor Class (1,724,884) (1,770,707) Advisor Class (139,985) (116,867) I Class (319,417) (124,708) Increase in net assets from capital share transactions 663,739 1,847,389 Net Assets Increase during period 1,867,176 2,268,681 Beginning of period 6,935,339 4,666,658 End of period $ 8,802,515 $ 6,935,339 29

32 Statement of Changes in Net Assets ($000s) Year Ended 12/31/17 12/31/16 Undistributed net investment income 877 2,691 *Share information Shares sold Investor Class 40,021 60,113 Advisor Class 2,306 5,751 I Class 24,033 35,830 Distributions reinvested Investor Class 2,933 3,699 Advisor Class I Class 1, Shares redeemed Investor Class (42,789) (49,159) Advisor Class (3,478) (3,243) I Class (7,879) (3,375) Increase in shares outstanding 16,359 50,642 The accompanying notes are an integral part of these financial statements. 30

33 December 31, 2017 Notes to Financial Statements T. Rowe Price Dividend Growth Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company. The fund seeks dividend income and long-term growth primarily through investments in stocks. The fund has three classes of shares: the Dividend Growth Fund (Investor Class), the Dividend Growth Fund Advisor Class (Advisor Class), and the Dividend Growth Fund I Class (I Class). Advisor Class shares are sold only through unaffiliated brokers and other unaffiliated financial intermediaries. I Class shares generally are available only to investors meeting a $1,000,000 minimum investment or certain other criteria. The Advisor Class operates under a Board-approved Rule 12b-1 plan pursuant to which the class compensates financial intermediaries for distribution, shareholder servicing, and/or certain administrative services; the Investor and I Classes do not pay Rule 12b-1 fees. Each class has exclusive voting rights on matters related solely to that class; separate voting rights on matters that relate to all classes; and, in all other respects, the same rights and obligations as the other classes. Note 1 - Significant Accounting Policies Basis of Preparation The fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 (ASC 946). The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), including, but not limited to, ASC 946. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity. Investment Transactions, Investment Income, and Distributions Investment transactions are accounted for on the trade date basis. Income and expenses are recorded on the accrual basis. Realized gains and losses are reported on the identified cost basis. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Income tax-related interest and penalties, if incurred, 31

34 are recorded as income tax expense. Distributions from REITs are initially recorded as dividend income and, to the extent such represent a return of capital or capital gain for tax purposes, are reclassified when such information becomes available. Income distributions are declared and paid by each class quarterly. Distributions to shareholders are recorded on the ex-dividend date. A capital gain distribution may also be declared and paid by the fund annually. Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective date of such transaction. The portion of the results of operations attributable to changes in foreign exchange rates on investments is not bifurcated from the portion attributable to changes in market prices. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses. Class Accounting Shareholder servicing, prospectus, and shareholder report expenses incurred by each class are charged directly to the class to which they relate. Expenses common to all classes, investment income, and realized and unrealized gains and losses are allocated to the classes based upon the relative daily net assets of each class. To the extent any expenses are waived or reimbursed in accordance with an expense limitation (see Note 5), the waiver or reimbursement is charged to the applicable class or allocated across the classes in the same manner as the related expense. The Advisor Class pays Rule 12b-1 fees, in an amount not exceeding 0.25% of the class s average daily net assets. Rebates Subject to best execution, the fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the fund in cash. Commission rebates are reflected as realized gain on securities in the accompanying financial statements and totaled $13,000 for the year ended December 31, New Accounting Guidance In March 2017, the FASB issued amended guidance to shorten the amortization period for certain callable debt securities, held at a premium. The guidance is effective for fiscal years and interim periods beginning after December 15, Adoption will have no effect on the fund s net assets or results of operations. 32

35 On August 1, 2017, the fund implemented amendments to Regulation S-X, issued by the Securities and Exchange Commission, which require standardized, enhanced disclosures, particularly related to derivatives, in investment company financial statements. Adoption had no effect on the fund s net assets or results of operations. Indemnification In the normal course of business, the fund may provide indemnification in connection with its officers and directors, service providers, and/or private company investments. The fund s maximum exposure under these arrangements is unknown; however, the risk of material loss is currently considered to be remote. Note 2 - VALUATION The fund s financial instruments are valued and each class s net asset value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for business. However, the NAV per share may be calculated at a time other than the normal close of the NYSE if trading on the NYSE is restricted, if the NYSE closes earlier, or as may be permitted by the SEC. Fair Value The fund s financial instruments are reported at fair value, which GAAP defines as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) is an internal committee that has been delegated certain responsibilities by the fund s Board of Directors (the Board) to ensure that financial instruments are appropriately priced at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees pricing-related policies and procedures and approves all fair value determinations. Specifically, the Valuation Committee establishes procedures to value securities; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; oversees the selection, services, and performance of pricing vendors; oversees valuation-related business continuity practices; and provides guidance on internal controls and valuation-related matters. The Valuation Committee reports to the Board and has representation from legal, portfolio management and trading, operations, risk management, and the fund s treasurer. 33

36 Various valuation techniques and inputs are used to determine the fair value of financial instruments. GAAP establishes the following fair value hierarchy that categorizes the inputs used to measure fair value: Level 1 quoted prices (unadjusted) in active markets for identical financial instruments that the fund can access at the reporting date Level 2 inputs other than Level 1 quoted prices that are observable, either directly or indirectly (including, but not limited to, quoted prices for similar financial instruments in active markets, quoted prices for identical or similar financial instruments in inactive markets, interest rates and yield curves, implied volatilities, and credit spreads) Level 3 unobservable inputs Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use to price the financial instrument. Unobservable inputs are those for which market data are not available and are developed using the best information available about the assumptions that market participants would use to price the financial instrument. GAAP requires valuation techniques to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. When multiple inputs are used to derive fair value, the financial instrument is assigned to the level within the fair value hierarchy based on the lowest-level input that is significant to the fair value of the financial instrument. Input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level but rather the degree of judgment used in determining those values. Valuation Techniques Equity securities listed or regularly traded on a securities exchange or in the over-the-counter (OTC) market are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made. OTC Bulletin Board securities are valued at the mean of the closing bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the closing bid and asked prices for domestic securities and the last quoted sale or closing price for international securities. 34

37 For valuation purposes, the last quoted prices of non-u.s. equity securities may be adjusted to reflect the fair value of such securities at the close of the NYSE. If the fund determines that developments between the close of a foreign market and the close of the NYSE will affect the value of some or all of its portfolio securities, the fund will adjust the previous quoted prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust quoted prices to reflect fair value, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. The fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with quoted prices and information to evaluate or adjust those prices. The fund cannot predict how often it will use quoted prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the fund routinely compares quoted prices, the next day s opening prices in the same markets, and adjusted prices. Actively traded equity securities listed on a domestic exchange generally are categorized in Level 1 of the fair value hierarchy. Non-U.S. equity securities generally are categorized in Level 2 of the fair value hierarchy despite the availability of quoted prices because, as described above, the fund evaluates and determines whether those quoted prices reflect fair value at the close of the NYSE or require adjustment. OTC Bulletin Board securities, certain preferred securities, and equity securities traded in inactive markets generally are categorized in Level 2 of the fair value hierarchy. Investments in mutual funds are valued at the mutual fund s closing NAV per share on the day of valuation and are categorized in Level 1 of the fair value hierarchy. Assets and liabilities other than financial instruments, including short-term receivables and payables, are carried at cost, or estimated realizable value, if less, which approximates fair value. Thinly traded financial instruments and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee. The objective of any fair value pricing determination is to arrive at a price that could reasonably be expected from a current sale. Financial instruments fair valued by the Valuation Committee are primarily private placements, restricted securities, warrants, rights, and other securities that are not publicly traded. 35