Automatic Data Processing Hikes Quarterly Dividend 10% (ADP)
By: Ned Piplovic,
Automatic Data Processing, Inc. continued its decades-long record of consecutive dividend boosts with a double-digit percentage hike to supplement its 2.3% yield.
The company rewarded its shareholders with more than four decades of consecutive annual dividend hikes. As one of the S&P 500 companies, with such a record of consecutive dividend hikes and a market capitalization in excess of $3 billion, ADP is currently one of only 51 companies designated Dividend Aristocrats. In addition to the long-term dividend payout growth, the company rewarded investors with a stable share price growth, which reached nearly 15% in the most recent trailing 12-month period.
ADP will pay its next dividend on December 21, 2017, to all its shareholders of record prior to the December 5, 2017, ex-dividend date.
Automatic Data Processing, Inc. (NASDAQ:ADP)
Founded in 1949 and headquartered in Roseland, New Jersey, Automatic Data Processing, Inc. provides business process outsourcing services for more than 650,000 clients in more than 110 countries. The company operates through two segments, Employer Services and Professional Employer Organization (PEO) Services.
The Employer Services segment offers software and service-based business solutions that support human resources (HR) business processes and technology-enabled human capital management. Its offerings include payroll services, benefits administration, talent management, HR management, time and attendance management, insurance services, retirement services and tax compliance services.
The PEO Services segment offers HR outsourcing solutions through a co-employment model. This segment offers HR administration services, such as employee recruitment, payroll and tax administration, time and attendance management, benefits administration, employee training and development and employee leave administration. Additionally, this segment provides services for management of employee benefits and guidance on compliance with federal, state and local employment laws and regulations.
The current $0.63 quarterly distribution is 10.5% higher than the previous quarter’s $0.57 payout. This new amount converts to a $2.52 annualized dividend and a 2.3% yield, which is in line with the company’s average yield over the past five years. Additionally, the ADP’s current yield outperforms the 1.22% average dividend yield of the Technology sector by 86% and the $0.95 average yield of ADP’s peers in the Business Software & Services segment by almost 140%.
ADP has raised its annual dividend payout for the past 41 consecutive years. Just over the past two decades, the total annual dividend amount increased almost 10-fold by growing at an average rate of nearly 12% per year.
The company complemented its stable dividend growth with a significant asset appreciation over the past few years. The share price started its current trailing 12-month period with a 2% drop between November 29, 2016, and February 1, 2017, when the share price hit its 52-week low of $95.25. However, after hitting its bottom at the beginning of February, the share price rose nearly 25% to reach its 52-week high of $118.91 on July 31, 2017. Since peaking at the end of July, the share price pulled back 6.5% and closed at $111.22 on November 28, 2017, which is almost 17% above the February low and nearly 15 higher that it was 12 months ago. Over the last five years, the share price is up 123%.
The combined benefit of the rising dividend and asset appreciation rewarded the company’s shareholder with substantial total returns. Over the last 12 months, the shareholders received a 16.7% total return. The total returns over the past three and five years came in at 38% and 149%, respectively.
While investors could find a few equities with stronger share price growth or with higher dividend yields, most of those stocks will not be able to maintain those growth rates over extended periods and will experience significant volatility. The ADP stock provides an investment alternative. Its combination of steadily rising dividends and stable asset appreciation makes the ADP stock an excellent choice for long-term portfolio growth.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.