Automatic Data Processing (ADP) 2013 Review

Automatic Data Processing (ADP) provides payroll and tax filing services, brokerage services, comprehensive human resource services and financial services to auto and truck dealerships. The company has grown profits and dividends 6-14% over the last 10 years and has earned an 18-20% return on equity. While the 2008-2009 recession impacted ADP somewhat, it did very well relative to other companies.  Long term, the company should  continue to prosper based:

(1) the economic recovery has led to an increase in both customers and the number of checks processed,

(2) the contribution from the recent acquisitions,

(3) growth in its client base as well as the average account balance,

(4) its stock buy back program.

Negatives:

(1)   a decline in the interest earned on funds held,

(2) a slowdown in European economic activity.

ADP is rated A++ by Value Line, has only 1% of its capitalization in debt and its stock yields 2.6%.

  Statistical Summary

               Stock        Dividend       Payout      # Increases  

               Yield      Growth Rate     Ratio       Since 2003

ADP          2.6%            8%            56%             10

Ind Ave      1.5              10              23               NA 

                Debt/                        EPS Down       Net        Value Line

                Equity         ROE      Since 2003      Margin       Rating

ADP           1%            23%           2                  13%          A++

Ind Ave      17              23             NA                12            NA

      Chart

           

            Note: ADP stock made good progress off its October 2008 low, quickly surpassing the downtrend off its November 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).  Short term, it is in an uptrend (brown lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a 50% position in ADP.  The upper boundary of its Buy Value Range is $53; the lower boundary of its Sell Half Range is $93.

http://finance.yahoo.com/q?s=ADP

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