Stock Analysis

Automatic Data Processing's (NASDAQ:ADP) Dividend Will Be Increased To $1.25

  •  Updated
NasdaqGS:ADP
Source: Shutterstock

Automatic Data Processing, Inc. (NASDAQ:ADP) will increase its dividend from last year's comparable payment on the 1st of January to $1.25. This makes the dividend yield 2.0%, which is above the industry average.

Our analysis indicates that ADP is potentially overvalued!

Automatic Data Processing's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Automatic Data Processing's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 40.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

historic-dividend
NasdaqGS:ADP Historic Dividend November 12th 2022

Automatic Data Processing Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.58 in 2012, and the most recent fiscal year payment was $5.00. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Automatic Data Processing has been growing its earnings per share at 13% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Automatic Data Processing's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Automatic Data Processing that investors should know about before committing capital to this stock. Is Automatic Data Processing not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

What are the risks and opportunities for Automatic Data Processing?

Automatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide.

View Full Analysis

Rewards

  • Earnings are forecast to grow 8.1% per year

  • Earnings grew by 14.7% over the past year

Risks

  • Has a high level of debt

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report

Further research on
Automatic Data Processing

ValuationFinancial HealthInsider TradingManagement Team