June 13, 2025 a 03:31 am
ADP: Dividend Analysis - Automatic Data Processing, Inc.
Automatic Data Processing, Inc. (ADP) stands out as a robust contender in the dividend investing arena, distinguished by its solid track record and consistent performance. This analysis delves into ADP's dividend yield, growth, and payout ratios, addressing essential financial metrics, and underscores the company's stability and profitability. With its strategic financial management and historical dividend resilience, ADP remains a reliable choice for investors seeking sustainable income. 📊
Overview
ADP operates within the technology sector and has exhibited a commendable dividend yield of 1.94%. Presently, it offers a dividend of 5.32 USD per share and boasts an impressive dividend history spanning 43 years without any recent cuts or suspensions.
| Key Metrics | Details |
|---|---|
| Sector | Technology |
| Dividend Yield | 1.94% |
| Current Dividend per Share | 5.32 USD |
| Dividend History | 43 years |
| Last Cut or Suspension | None |
Dividend History
ADP's dividend history reflects its commitment to shareholder returns, evidenced by uninterrupted payouts over 43 years. This consistency is crucial in building investor trust and providing predictable income in volatile markets.
| Year | Dividend per Share (USD) |
|---|---|
| 2025 | 3.08 |
| 2024 | 5.74 |
| 2023 | 5.15 |
| 2022 | 4.37 |
| 2021 | 3.83 |
Dividend Growth
The company's dividend growth rate signals its financial health and potential for future income enhancement. Over the past three years, the dividend grew by 14.44%, and over five years, by 11.84%, highlighting a steady upwards trajectory that adds value to long-term investments.
| Time | Growth |
|---|---|
| 3 years | 14.44% |
| 5 years | 11.84% |
The average dividend growth is 11.84% over 5 years. This shows moderate but steady dividend growth.
Payout Ratio
Examining ADP's payout ratios offers insights into its dividend sustainability. An EPS-based payout ratio of 54.11% and a free cash flow-based payout ratio of 47.75% are within manageable ranges, suggesting that ADP maintains a strong balance between rewarding shareholders and reinvesting in business growth.
| Key Figure | Ratio |
|---|---|
| EPS-based | 54.11% |
| Free Cash Flow-based | 47.75% |
ADP's payout ratios demonstrate a healthy financial posture, proving the company can support its dividends without compromising financial stability. ⚠️
Cashflow & Capital Efficiency
Evaluating ADP's cash flow metrics and capital efficiency is essential to understanding its operational capabilities and value creation. Strong free cash flow yields and effective capital allocations enhance the company's ability to finance dividends and other strategic initiatives.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | 3.71% | 4.00% | 2.89% |
| Earnings Yield | 3.88% | 3.75% | 3.35% |
| CAPEX to Operating Cash Flow | 13.55% | 13.58% | 17.85% |
| Stock-based Compensation to Revenue | 1.27% | 1.22% | 1.22% |
| Free Cash Flow / Operating Cash Flow Ratio | 86.45% | 86.42% | 82.15% |
ADP's stable cash flow and efficient capital allocation underline its robust financial health and consistent return on investment. 📈
Balance Sheet & Leverage Analysis
Analyzing the balance sheet helps assess ADP's leverage and liquidity, crucial for maintaining financial flexibility and meeting obligations. Low debt ratios and healthy liquidity indicators are vital for sustaining long-term growth and financial stability.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 81.48% | 95.15% | 108.34% |
| Debt-to-Assets | 6.82% | 6.55% | 5.54% |
| Debt-to-Capital | 44.90% | 48.76% | 52.00% |
| Net Debt to EBITDA | 13.65% | 23.94% | 46.72% |
| Current Ratio | 1.01 | 0.99 | 0.99 |
| Quick Ratio | 1.01 | 0.99 | 0.99 |
| Financial Leverage | 11.95 | 14.53 | 19.55 |
The leverage analysis affirms ADP's capacity to sustain its debt levels while maintaining essential liquidity, a positive indication of its robust financial structure. ✅
Fundamental Strength & Profitability
Assessing ADP's fundamental strength and profitability measures the effectiveness of its operations and strategic investments. Superior returns and margins exemplify the company's potential for growth and competitive advantage.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 82.51% | 97.23% | 91.43% |
| Return on Assets | 6.90% | 6.69% | 4.68% |
| Margins: Net | 19.54% | 18.94% | 17.87% |
| Margins: EBIT | 27.26% | 26.04% | 23.55% |
| Margins: EBITDA | 30.20% | 29.12% | 26.70% |
| Margins: Gross | 45.44% | 44.74% | 42.65% |
| Research & Development to Revenue | 4.98% | 4.69% | 4.84% |
ADP's thorough profitability and strong ROE indicate outstanding operation efficiency and value creation, securing its position as an industry leader. 🗣️
Price Development
Dividend Scoring System
| Criterion | Score | Graph |
|---|---|---|
| Dividend Yield | 4 | |
| Dividend Stability | 5 | |
| Dividend Growth | 4 | |
| Payout Ratio | 4 | |
| Financial Stability | 4 | |
| Dividend Continuity | 5 | |
| Cashflow Coverage | 4 | |
| Balance Sheet Quality | 4 |
Overall Score: 34/40
Rating
ADP earns a strong investment rating with sustainable dividend practices, prudent financial management, and solid growth indicators. Investors seeking reliable income should consider ADP a premier choice for its impressive stability, profitability, and long-standing dividend history. 📈