Automatic Data Processing Inc's Dividend Analysis
Assessing ADP's Dividend Sustainability and Growth Prospects
Automatic Data Processing Inc (NASDAQ:ADP) recently announced a dividend of $1.4 per share, payable on 2024-04-01, with the ex-dividend date set for 2024-03-07. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into Automatic Data Processing Inc's dividend performance and assess its sustainability.
What Does Automatic Data Processing Inc Do?
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Automatic Data Processing Inc is a prominent provider of payroll and human capital management solutions, catering to a wide range of businesses from small startups to large multinational corporations. Founded in 1949, ADP boasts a client base of over 1 million, with a strong presence in the United States. The company's offerings include comprehensive payroll services, human resources outsourcing, insurance, retirement services, and human capital management solutions. Additionally, ADP's Professional Employer Organization segment offers specialized HR outsourcing solutions to small and mid-sized businesses through a co-employment model.
A Glimpse at Automatic Data Processing Inc's Dividend History
Automatic Data Processing Inc has a longstanding tradition of consistent dividend payments, with a track record dating back to 1975. The company distributes dividends quarterly and has managed to increase its dividend annually since 1975, earning it the prestigious title of a dividend aristocrat. This accolade is reserved for companies that have consistently raised their dividends for at least 25 consecutive years. Below is a chart illustrating the historical trends of Automatic Data Processing Inc's annual Dividends Per Share.
Breaking Down Automatic Data Processing Inc's Dividend Yield and Growth
As of the latest data, Automatic Data Processing Inc boasts a 12-month trailing dividend yield of 2.12% and a forward dividend yield of 2.31%, indicating an anticipated increase in dividend payouts over the next 12 months. The company's annual dividend growth rate over the past three years stands at 10.80%, which extends to 12.40% over a five-year period. Over the past decade, Automatic Data Processing Inc has achieved an impressive annual dividends per share growth rate of 11.10%. When considering Automatic Data Processing Inc's dividend yield and five-year growth rate, the 5-year yield on cost for the company's stock is approximately 3.80%.
The Sustainability Question: Payout Ratio and Profitability
To evaluate the sustainability of Automatic Data Processing Inc's dividends, it is essential to consider the company's payout ratio. The dividend payout ratio is a key indicator of how much of its earnings the company distributes as dividends. A lower ratio suggests a healthy balance between paying dividends and retaining earnings for growth and potential downturns. As of 2023-12-31, Automatic Data Processing Inc's dividend payout ratio is 0.60. The company's profitability rank is an impressive 9 out of 10, indicating strong earnings potential compared to its peers. Furthermore, Automatic Data Processing Inc has consistently reported positive net income each year for the past decade, reinforcing its robust profitability.
Growth Metrics: The Future Outlook
For dividends to be sustainable, a company must demonstrate sound growth metrics. Automatic Data Processing Inc's growth rank is an excellent 9 out of 10, suggesting a strong growth trajectory. The company's revenue per share and 3-year revenue growth rate of approximately 8.40% per year outperform roughly 59% of global competitors. Automatic Data Processing Inc's 3-year EPS growth rate of about 11.60% per year also surpasses approximately 50.56% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 12.00% outperforms about 59.31% of global competitors, indicating strong earnings before interest, taxes, depreciation, and amortization.
Next Steps
In conclusion, Automatic Data Processing Inc's consistent dividend increases, manageable payout ratio, and strong profitability make it a potentially attractive option for dividend-seeking investors. The company's impressive growth metrics further bolster the likelihood of continued dividend sustainability. Value investors interested in high-dividend yield opportunities may find Automatic Data Processing Inc's stock to be a compelling consideration. For further exploration of such investment opportunities, GuruFocus Premium users can utilize the High Dividend Yield Screener to discover stocks with high dividend yields.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
