Automatic Data Processing (ADP) 2014 Review

Automatic Data Processing (ADP) provides business outsourcing solutions including 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 5-14% over the last 10 years and has earned an 18-20% return on equity.  Long term, the company should continue to prosper based on:

(1) a growing pipeline of business,

(2) the contribution from the recent acquisitions,

(3) improving technology enhances the client experience,

(4) its stock buyback 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 2004

ADP          2.6%            8%            59%             10

Ind Ave      1.9              11              39               NA 

                Debt/                        EPS Down       Net        Value Line

                Equity         ROE      Since 2004      Margin       Rating

ADP           1%            24%           2                  13%          A++

Ind Ave      19              20             NA               12            NA

    Chart

            Note: ADP stock made great progress off its October 2008 low, quickly surpassing the downtrend off its October 2007 high (straight red line).  Long term, it is an uptrend (blue lines); intermediate term, it is in an uptrend (purple lines); short term, it is in an uptrend (brown line).  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 $60; the lower boundary of its Sell Half Range is $109.

    

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

6/14