November 21, 2025 a 11:31 am
ADP: Dividend Analysis - Automatic Data Processing, Inc.
Automatic Data Processing, Inc. (ADP) stands as a benchmark in the payroll and human resources sector with a solid commitment to dividend distribution. With over four decades of unbroken dividend payments, ADP has demonstrated financial resilience and a commitment to rewarding its shareholders. The company's robust market cap further underpins its stability, providing investors with reliable returns in varying market conditions.
📊 Overview
ADP operates within the technology sector, specifically focusing on business outsourcing solutions. Its dividend yield stands at a moderate 2.54%, which, although not the highest, is complemented by a consistent dividend history spanning 43 years without cuts or suspensions, highlighting its reliability.
| Attribute | Details |
|---|---|
| Sector | Technology |
| Dividend Yield | 2.54% |
| Current Dividend Per Share | 5.89 USD |
| Dividend History | 43 years |
| Last Cut or Suspension | None |
📉 Dividend History
The stability in ADP's dividend history reflects a robust business model and management's commitment to shareholder value. Predictable dividends are crucial for income-focused investors seeking stability and long-term growth. The absence of cuts or suspensions over decades further solidifies this trust.
| Year | Dividend Per Share (USD) |
|---|---|
| 2025 | 6.32 |
| 2024 | 5.74 |
| 2023 | 5.15 |
| 2022 | 4.37 |
| 2021 | 3.83 |
📈 Dividend Growth
ADP's dividend growth is an essential metric for evaluating its future income potential. Over the past five years, the growth rate has been a consistent 11.84%, indicative of a healthy and expanding business. This steady growth benefits investors looking for rising income streams.
| 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
The payout ratio is crucial in understanding how much of ADP's earnings are paid out as dividends. An EPS-based payout ratio of 57.73% and an FCF-based payout ratio of 51.80% indicates a balanced approach towards sustaining dividends while retaining enough for business growth.
| Key Figure | Ratio |
|---|---|
| EPS-based Payout Ratio | 57.73% |
| Free Cash Flow-based | 51.80% |
These figures suggest that the dividends are well-covered by earnings, ensuring sustainability without straining the company's financials.
💰 Cashflow & Capital Efficiency
The metrics surrounding cash flow and capital efficiency, such as free cash flow yield and CAPEX to operating cash flow, indicate how effectively ADP converts revenue into available cash for investors. This is a strong indicator of operational success and capital use.
| Metric | 2025 | 2024 | 2023 |
|---|---|---|---|
| Free Cash Flow Yield | 3.80% | 3.71% | 3.99% |
| Earnings Yield | 3.25% | 3.88% | 3.75% |
| CAPEX to Operating Cash Flow | 3.29% | 13.55% | 13.58% |
| Stock-based Compensation to Revenue | 1.29% | 1.27% | 1.22% |
| Free Cash Flow / Operating Cash Flow Ratio | 96.58% | 86.45% | 86.42% |
ADP's cash flow metrics reflect a strong operating model that generates sufficient cash flow, ensuring continued dividend payments and room for growth investments.
💪 Balance Sheet & Leverage Analysis
Evaluating ADP's leverage and balance sheet strength involves examining metrics like debt-to-equity and interest coverage ratios. A stable debt structure underpins the company's ability to navigate economic cycles while maintaining profitability.
| Metric | 2025 | 2024 | 2023 |
|---|---|---|---|
| Debt-to-Equity | 146.50% | 81.48% | 98.15% |
| Debt-to-Assets | 16.99% | 6.82% | 6.76% |
| Debt-to-Capital | 59.43% | 44.90% | 49.53% |
| Net Debt to EBITDA | 0.92 | 0.14 | 0.26 |
| Current Ratio | 1.05 | 1.01 | 0.99 |
| Quick Ratio | 1.05 | 1.01 | 0.99 |
| Financial Leverage | 8.62 | 11.95 | 14.53 |
ADP has maintained a manageable debt level relative to its equity and assets, facilitating robust financial health that can support dividend distributions despite potential market downturns.
📈 Fundamental Strength & Profitability
Profitable sustainability is essential for long-term viability. ROE and profitability margin indicators reflect ADP's operational effectiveness and potential to continue delivering competitive returns to its investors.
| Metric | 2025 | 2024 | 2023 |
|---|---|---|---|
| Return on Equity | 65.93% | 82.51% | 97.23% |
| Return on Assets | 7.64% | 6.90% | 6.69% |
| Margins: Net | 19.84% | 19.54% | 18.94% |
| Margins: EBIT | 27.99% | 27.28% | 26.07% |
| Margins: EBITDA | 30.36% | 30.20% | 29.12% |
| Margins: Gross | 50.84% | 49.94% | 48.89% |
| R&D to Revenue | 4.82% | 4.98% | 4.69% |
Strong returns and profitability suggest ADP's capacity to generate substantial shareholder value and indicates an ability to sustain its dividend policy amidst market volatility.
Price Development
✅ Dividend Scoring System
Our dividend scoring system rates various aspects of ADP's dividend policy and financial health on a scale of 1 to 5, indicating relative strength in each area.
| Category | Score | Graph |
|---|---|---|
| Dividend Yield | 3 | |
| Dividend Stability | 5 | |
| Dividend Growth | 4 | |
| Payout Ratio | 4 | |
| Financial Stability | 4 | |
| Dividend Continuity | 5 | |
| Cashflow Coverage | 4 | |
| Balance Sheet Quality | 4 |
Overall Score: 33/40
⭐ Rating
Automatic Data Processing, Inc. (ADP) offers a compelling dividend profile characterized by stability and growth, backed by strong financial health. While the yield is modest, the company's reliability and robust dividend growth history make it an attractive investment for those seeking a balance of income and growth potential in their portfolio.