ADP Offers Steady Capital Gains, Dividend Hikes


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Automatic Data Processing ( ADP ) has offered steady capital gains and dividend increases in recent years, rewarding long-term investors who hung on through the 2008-09 recession.

The world's biggest provider of payroll and data processing services is up 20% this year, topping the S&P 500. It's risen 23% over the past year and has more than doubled from a low of 30.83 in October 2008.

Meanwhile, the Roseland, N.J.-based company has boosted its quarterly dividend every year since 2003, a nearly fourfold increase from 12 cents a share to 44 cents a share. That equates to an annual dividend of $1.76 a share, which yields 2.5% annually at the current share price. That's about the same as the S&P 500 average.

ADP's profit and sales growth has been slow but steady. The company's three-year earnings stability factory is 1 on a scale of 0 to 99, with 0 being most stable.

Profit for the fiscal year is seen rising 7% to $2.91 a share, in line with ADP's three-year average. Earnings are expected to rise 9% in 2014. Sales growth has averaged 9% over the past three years.

ADP's fortunes are hitched to the U.S. economy, where it earns about 80% of its revenue. Europe and Canada account for most of the rest.

ADP has been riding its 10-week line higher this year. It reached a record high of 72 on May 17 before pulling back to its key support line in quiet volume. It's now 5% off its high and is showing the elements of a flat base.

Institutional investors are also supporting the stock, whose Accumulation-Distribution Rating of B is greater than the neutral C.

Meanwhile, its Composite Rating is a respectable 85 and its Relative Price Strength Rating is 72.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance , Investing Ideas

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