Portfolio New Addition: Automatic Data Processing

The third company stock to be added into my portfolio is Automatic Data Processing, Inc. (NASDAQ: ADP). The company is listed as one of the S&P 500 Dividend Aristocrats which means they have increased their annual dividends payout for over 255 years. A look at the rationale behind investing in ADP and a reminder to why I should continue holding on to it.

Business people silhouettes | Investor Monkey

Automatic Data Processing logo | Investor MonkeyAutomatic Data Processing, Inc. (NASDAQ: ADP) is a provider for human capital management solutions for employers and computing solutions to vehicle dealers.

ADP operates through three business segments: Employer Services, Professional Employer Organisation (PEO) Services and Dealer Services.

Serving more than 430,000 clients via ADP’s software as a service (SaaS), the company also provides outsourcing solutions enabling their clients to outsource their HR, time and attendance management, payroll and benefits.

Rationale for Addition to Portfolio

Another company belonging to the S&P 500 Dividend Aristocrats that I have added into my portfolio. Though I did not intentionally find companies within the list to invest in but the list of companies that I have filtered as possible investments mostly comes from the S&P 500 Dividend Aristocrats list.

This has become one of the rationale for adding ADP into my portfolio – a company within the S&P 500 Dividend Aristocrats means it has paid increasing annual dividends for over 25 years. And with the ability to do so likely means ADP is likely to continue increase their annual dividends in the years to come.

Over the past five years, ADP has grown their dividends at 3.3% annual (on average) while Earnings per Share (EPS) grew at 5.1%. The EPS is not growing a lot faster than their Dividends per Share (DPS) as EPS for fiscal year 2015 saw a dip of 2.9%. Furthermore, with a dividend payout ratio at 62.0%, they still have room for their dividends to grow with a need to monitor the EPS will grow faster than the DPS to bring down the payout ratio.

I will continue to monitor the earnings for ADP to ensure that this dip is indeed a one-off incident.

I was contemplating whether to add ADP into my portfolio with another company (which I shall not mention now) and what made me decide on add ADP in this month’s investment is really because ADP has got Ex-Div on September 9 and thus September 8 is really the last day to buy the share to be entitled for the upcoming dividend payment in October.

Transaction Details

Date September 08, 2015
Shares 6
Price 77.1975
Yield (TTM)* 2.54%
* as at time of purchase


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