Assessing the Dividend Performance and Sustainability of ADP
Automatic Data Processing Inc (ADP, Financial) recently announced a dividend of $1.4 per share, payable on 2024-01-01, with the ex-dividend date set for 2023-12-07. 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 look into Automatic Data Processing Inc's dividend performance and assess its sustainability.
What Does Automatic Data Processing Inc Do?
ADP is a provider of payroll and human capital management solutions servicing the full scope of businesses from micro to global enterprises. ADP was established in 1949 and serves over 1 million clients primarily in the United States. ADP's employer services segment offers payroll, human capital management solutions, human resources outsourcing, insurance and retirement services. The smaller but faster-growing professional employer organization segment provides HR outsourcing solutions to small and midsize businesses through a co-employment model.
A Glimpse at Automatic Data Processing Inc's Dividend History
Automatic Data Processing Inc has maintained a consistent dividend payment record since 1975, currently distributing dividends on a quarterly basis. As a testament to its commitment to shareholders, Automatic Data Processing Inc has increased its dividend each year since 1975, earning the prestigious title of a dividend aristocrat. Below is a chart showing annual Dividends Per Share to track historical trends.
Breaking Down Automatic Data Processing Inc's Dividend Yield and Growth
As of today, Automatic Data Processing Inc boasts a 12-month trailing dividend yield of 2.17% and a forward dividend yield of 2.44%, indicating anticipated increases in dividend payments over the next 12 months. The company's impressive dividend growth rates are 10.80% over the past three years, 12.40% over five years, and 11.10% over the past decade. Consequently, the 5-year yield on cost for Automatic Data Processing Inc stock is approximately 3.89%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. Automatic Data Processing Inc's dividend payout ratio is 0.59 as of 2023-09-30, suggesting a healthy balance between distributing earnings and retaining funds for future growth. Coupled with a profitability rank of 9 out of 10, Automatic Data Processing Inc demonstrates strong earnings potential, underpinned by a decade of positive net income.
Growth Metrics: The Future Outlook
Automatic Data Processing Inc's growth rank of 9 out of 10 signals robust growth prospects. The company's annual revenue growth rate of 8.40% outperforms approximately 60.86% of global competitors. Additionally, its 3-year EPS growth rate of 11.60% and 5-year EBITDA growth rate of 12.00% both outperform the majority of global competitors, indicating a strong foundation for future dividend sustainability.
Next Steps
In conclusion, Automatic Data Processing Inc's dividend payments, growth rate, payout ratio, and profitability metrics paint a picture of a company that not only values returning capital to shareholders but also demonstrates the capacity to do so sustainably. The consistent increase in dividends, coupled with robust financial health and growth prospects, positions Automatic Data Processing Inc as an attractive option for value investors focused on income-generating stocks. As investors consider their next steps, they may explore the potential of ADP's dividends in their portfolios, keeping in mind the company's strong historical performance and promising future outlook.
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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.
