Paychex Inc. provides computerized payroll-accounting services, salary deposit services, automatic payroll tax payment and tax return filing services and human resource products and services to approximately 570,000 small and medium sized businesses. The company has earned a 25%+ return on equity over the last 10 years and has grown profits and dividends 8-13% in the same time period. While PAYX is somewhat sensitive to the economy, it should continue to provide above average returns as a result of:
(1) rising number of checks processed as well as an increase in revenue per check,
(3) increasing demand for health and benefits offerings,
(4) geographic expansion,
(5) an R&D effort designed to expand product offerings.
(1) a weak economy negatively impacts the growth of its client base,
(2) low interest rates are impacting ‘interest on funds held for clients’.
Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2004
Ind Ave 1.9 11* 39 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2004 Margin Rating
Ind Ave 19 20 NA 12 NA
*over one half of the companies in
PAYX’s industry don’t pay a
Note: PAYX stock made good progress off its March 2009 low, quickly surpassing the downtrend off its August 2007 high (straight red line) and the November 2008 trading high (green line). Long term, the stock is in an uptrend (blue lines). Intermediate term, it is in an uptrend (purple lines). The wiggly red line is the 50 day moving average. The Dividend Growth Portfolio owns a 75% position in PAYX. The upper boundary of its Buy Value Range is $24; the lower boundary of its Sell Half Range is $50.