Paychex Yields Steady Profit Growth, Dividend Payout

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Bigger payrolls could mean good times ahead forPaychex ( PAYX ), a provider of payroll, human resources and employee benefits outsourcing services for small and midsize companies.

The Rochester, N.Y.-based company extended its quarterly profit growth streak for a 14th straight quarter after reporting fiscal Q2 results Wednesday after the close. It earned 43 cents a share, up 5% from the prior year and a penny over views.

Revenue rose 7% to $610.5 million, as human resources services revenue jumped 12% and payroll services revenue 4%.


Year-over-year profit gains have ranged between 2% and 14% the past 14 quarters. That stable growth shows up in its three-year Earnings Stability Factor of 1 and five-year factor of 5, on a 0 to 99 scale. The lower the number, the steadier the growth.

Its annual earnings stumbled in fiscal 2009 and 2010 as the financial crisis took a toll on the economy, but has been back on the growth track since. With the economy and overall jobs picture improving, analysts forecast 6% growth in fiscal 2014 and 7% in 2015.

Paychex's dividend payout has trended higher throughout the years. The firm didn't halt its dividend even during the leaner financial crisis years -- it just didn't increase the amount. It began boosting the dividend in October 2011, and has paid out 35 cents a share the past two quarters for an annualized yield of 3.2%. That's higher than the S&P 500's 2.43% yield.

Its return on equity is 35% and has held at or above that level since fiscal 2008. Its ROE is well above the 17% threshold investors should aim for. Paychex also carries no debt.

The stock bounced off support at its 10-week moving average and gapped up Thursday to a six-year high in heavy volume. It's been in a wide trading range since peaking in late 2000. Paychex was a rapid riser during the '90s.

It's advanced 44% this year, outperforming the Nasdaq's 34% gain.



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




This article appears in: Investing , Investing Ideas

Referenced Stocks: PAYX

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