Paychex Hikes Quarterly Dividend 12% (PAYX)
By: Ned Piplovic,
Featured Image Source: paychecks.com
Paychex, Inc. (NASDAQ:PAYX) compensated its investors with another dividend boost and raised its current quarterly dividend amount 12% over the previous period’s payout.
In addition to the current dividend boost, the company also has been boosting its annual dividend amount almost every year over the past two decades. Since 1998, the company failed to raise its annual dividend payout only in 2010 and — depending on the point of view — might have cut its annual dividend in 2013 once. I will explain this in more detail later. While the company’s share price declined more than 12% since the end of January 2018, the long-term trend over the past five years continues to rise.
Investors seeking equities with dual benefits of rising dividends and asset appreciation might wish to take a longer look at this company, complete their own research and potentially take a position prior to the company’s next ex-dividend date on May 8, 2018, to ensure eligibility for the next round of dividend distributions on the May 24, 2018, pay date.
Paychex, Inc. (NASDAQ:PAYX)
Headquartered in Rochester, New York, and founded in 1979, Paychex, Inc. provides payroll, human resource (HR), retirement and insurance services for small to medium-sized businesses in the United States and Germany. The company offers payroll processing services, HR outsourcing services and retirement services administration. Additionally, the company offers insurance services for property and casualty coverage, such as workers’ compensation, business-owner policies, commercial auto, health and benefits coverage, as well as other HR services and products, such as employee handbooks, management manuals and required regulatory forms. Further, the company provides various accounting and financial services to small to medium-sized businesses comprising payroll funding and outsourcing services, which include payroll processing, invoicing and tax preparation; as well as other services, such as payment processing services, financial fitness programs and a small-business loan resource center.
The company’s current quarterly payout of $0.56 is 12% higher than the previous period’s $0.50 amount. This new quarterly dividend is equivalent to a $2.24 annualized payout for 2018 and a 3.7% forward dividend yield, which is 22% above the company’s own 3.0% average dividend yield over the past five years. Additionally, the company’s current yield is also 78.5% higher than the average yield of the entire Services sector, 133% above the 2.05% average yield for all the company’s peers in the Staffing & Outsourcing Services market segment and outperforms by more than 81% the 2% average yield of only the dividend-paying companies in that segment.
At the end of 2012, the company advanced and paid its dividend distributions from the first and second quarter of 2013 at the end of December the prior year. Therefore, with just two dividend distributions in 2013, it appears that the company cut its annual dividend for 2013. However, if we recognize those payouts as 2013 dividends, the company has not cut its annual dividend in the past two decades. In that case, the company’s current streak of consecutive annual dividends doubles to eight years. Over that period, the company enhanced its annual payout more than 80% by raising its annual amount at an average rate of 7.7%. Additionally, even with a missed hike in 2009, the company advanced its total annual dividend more than 20-fold over the past 20 years and maintained an average growth rate of 16.3% per year during that time.
The trailing 12 months began with a share price decline of 6.3% towards the 52-week low of $54.24 on August 11, 2017. However, the share price reversed direction quickly and rose almost 30% over the following four months. By December 18, 2017, the share price reached its 52-week high of $70.25. After peaking in mid-December of 2017, the share price levelled off and traded mostly sideways in 2018. The only price movements were two drops of more than 10% — one in the first week of February and one in the last week of March 2018. As a result, the share price closed on May 1, 2018, at $61.22, which was almost 13% below the December 2017 peak. However, the $61.22 closing price was also 5.7% higher for the trailing 12 months, almost 13% higher than the 52-week low from August 2017 and 62% higher than it was five years earlier.
The company provided its shareholders with a 5.7% total return in the last 12 months. Over the more extended periods of the past three and five years, the total returns were 36.7% and 89.7%, respectively.
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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.