Fiqh-us-Sunnah Volume 4, Funerals and Dhikr, Fiqh 4.138.

Some Muslim scholars hold that it is obligatory to send salutations to the Prophet, i.e. invoke blessings upon him, each time one hears his name mentioned. They, like Al-Tahawi and Al-Halimi, base their argument on a hadith recorded by Tirmizhi, which he grades as sound, from Abu Hurairah, that the Prophet, peace be upon him, said, “May the nose of the person in whose presence I am mentioned be covered with dirt if he does not invoke blessings upon me. And let the nose of that person be smeared with dust who finds the month of Ramadan but lets it come to an end without securing pardon for himself. And may the nose of the person be smeared with dust whose aged parents, both of them or one of them, are still living, and who fails them (i.e. by serving them) to enter Paradise.” (Related by Tirmizhi, who said it is an authentic hadith)

In a report related by Abu Zharr we read, “the Prophet, peace be upon him, said, ‘The most miserly among people is the one who fails to invoke blessings upon me when my name is mentioned in his or her presence’.”

Other scholars are of the opinion that invoking Allah’s blessings upon the Prophet, peace be upon him, only once while in a gathering is obligatory. After that it is no longer necessary, though it is preferred to do so. This is based on a hadith from Abu Hurairah that the Prophet, peace be upon him, said, “If some people sitting together in an assembly do not remember Allah in it, nor invoke Allah’s blessings upon His Prophet, peace be upon him, they will be sorry on the Day of Judgment. Allah may either punish them or forgive them.” (Tirmizhi)