Automatic Data Processing (Nasdaq:ADP)

Automatic Data Processing (Nasdaq:ADP) is one of the largest providers of payroll and human resources services to businesses. They tailor their services according to the size of the client, although they have mainly distinguished themselves on multinationals and large companies. ADP has 570,000 clients to whom it can provide the benefit of its 60 years of experience.

ADP's HR support services are among the sectors that are resisting the crisis, as it is true that employees will always have to be paid if they are to provide a service. In addition, the cumbersome procedures and systems that must be put in place mean that you cannot change suppliers overnight. SAP provided us with a good example of this.

ADP is currently offering a dividend of 2.7%, which is significantly less than its long-term average of 3.24%. We are therefore in a significantly less favorable situation than when I December 2010 analysis or than when I purchased it in April of the same year.

Average annual dividend growth has also slowed significantly, with 7,45%, while it was double that two years ago! But at least it remains positive, which means that the company has continued to grow its distributions for 36 years. The payout ratio, on the other hand, remains disconcertingly stable, with 56%, which leaves ADP a little margin in the event of a difficult passage.

Volatility remains one of the company's main strengths., with only 12.9%, even if it is slightly up. For a Nasdaq stock, this remains more than quite acceptable! When I told you that the sector was defensive in style... The beta of 0.7 also confirms that the stock is not very sensitive to market variations.

The stock has underperformed the Nasdaq over the past decade. as seen in the chart below, but this is more due to the strong catch-up of technology stocks after the bursting of the Internet bubble, than to any real weakness of ADP. If we look further back in time, we can see (below) that the performance of Automatic Data Processing is excellent.

ADP is thus awarded 3 stars, representing a good profitability/risk ratio. The yield and performance are correct, without being extraordinary, but they are compensated by a low volatility and an equally low sensitivity to the market and the dollar. It is typically a stock that could become interesting if its price were to correct downwards.