This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
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One stock that shows up on the list of high yield stocks list from the S&P 500 Dividend Aristocrats list is Automatic Data Processing. I have never looked at this stock before and thought I should. It has dropped a lot in the past few months along with all other stocks, especially financial focused companies. Is this the right time to consider an investment in ADP? Let’s find out…
The Company: Automatic Data Processing (ADP-NYSE)
Automatic Data Processing, Inc. is one of the largest providers of computerized transaction processing, data communication, and information services in the world. ADP Employer Services offers a comprehensive range of payroll, human resources, benefits administration, time and attendance, tax filing and reporting, professional employer organization, compliance management and retirement plan services to employers in the United States, Canada, Europe and Latin America.
| Yes | |
| Yes |
THE FUNDAMENTALS
Revenue
Click to EnlargeRevenue Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with < 2 Down Years | 0.5 |
| Choppy with > 2 Down Years | 0.0 |
| My Revenue Score | 0.0 |
Earnings Per Share
Click to EnlargeEarnings Per Share Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with < 2 Down Years | 0.5 |
| Choppy with > 2 Down Years | 0.0 |
| My EPS Score | 0.0 |
TOTAL FUNDAMENTALS SCORE: 0.0
THE RATIOS
Return on Equity
Click to EnlargeReturn on Equity Scoring
| Criteria | Scoring |
| Above 15% for Last 5 Years | 1.0 |
| At Least One Year Below 15% in Last 5 Years | 0.0 |
| My ROE Score | 1.0 |
Other Ratios
| Ratio | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Debt to Equity | < 0.50 | 0.01 | 1.0 |
| Payout Ratio | < 60% | 43% | 1.0 |
| Credit Rating | > BBB+ | AAA | 1.0 |
| Total Ratio Score | 3.0 |
TOTAL RATIOS SCORE: 4.0
DIVIDEND DATA
Annual Dividends
Click to EnlargeDividend Scoring
| Criteria | Scoring |
| 25+ Years of Dividend Growth | 1.0 |
| 10+ Years of Dividend Growth | 1.0 |
| < 10 Years of Dividend Growth | 0.0 |
| My Dividend Growth Score | 2.0 |
TOTAL DIVIDEND GROWTH SCORE: 2.0
STOCK VALUATION
| Valuation Metric | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Dividend Yield | Cur Yld > 10 Yr Avg Yld | 1.2% | 1.0 |
| Div Yld Compared to SPY Div Yld | Cur Yld > SPY Yld | 2.3% | 1.0 |
| P/E Ratio | Cur P/E < 10 Yr Avg P/E | 29.0 | 1.0 |
| Relative P/E | Relative P/E < 1.0 | 0.75 | 1.0 |
| Price to Sales | < 1.5 | 2.57 | 0.0 |
| Total Ratio Score | 4.0 |
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price
| Buy Zone |
Maybe Zone |
Sell Zone |
Current Price | Rating | Scoring (Buy=1.0, Other=0.0) |
| 0.0 |
TOTAL STOCK VALUATION SCORE: 4.0
SUMMARY
Points Earned:
10 out of 14
The stock is rated MEDIUM with 10 points earned through my analysis of the stock. The past couple of years performance has really hurt the stock and for me to invest in it I would need to start to see some recovery. In my experience, these down trends after a number of years of good performance can continue on for some time. I would not be a buyer of ADP at this time but will continue to watch the earnings and revenue trends over the next couple of years to see what happens.
| Rating | Points Required |
| High | 11+ points |
| Medium | 8-10 points |
| Low | < 8 points |
Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
The Dividend Guy does not own shares in ADP
Great analysis! I took a close look at ADP when I purchased PAYX. Then, like now, consistency was an issue with ADP. PAYX has also taken a pounding since I purchased it.
Best Wishes,
D4L
I just stumbled upon your site today. I like your points-based system and value-oriented and nuanced approach to stock selection. For example, I appreciate your looking for a company’s current P/E to be lower than the prior 10-yr average. Looking forward to you finding many more ‘high’ rated companies. Keep up the good work that you have begun.