Automatic Data Processing (NASDAQ: ADP) stock was among the best performers in fiscal 2019. The company also offers a healthy dividend yield to investors with a history of increasing dividends at a strong pace. ADP’s strategy of investing in its products, distribution, and services has been driving sustainable financial growth over the years.
ADP share price grew almost 30% in the past twelve months, extending the five-year rally to 100%. Automatic Data Processing stock is currently trading around an all-time high of $176. ADP share price is fairly priced considering a price to earnings ratio of 28, which is in line with the industry average. The sustainable growth in financial numbers is offering support to valuations despite a sharp share price gains in the past few years.
Financial Numbers are Supporting Automatic Data Processing Stock
The company is targeting mid-single-digit revenue and high double-digit earnings growth. Its revenue grew 6% in fiscal 2019 compared to the past year. ADP has been actively turning revenue growth into big profits. Its adjusted earnings grew by 20% in 2019 from the past year.
Carlos Rodriguez, President, and Chief Executive Officer, ADP. “We are pleased that we have balanced our financial growth objectives with a number of operational priorities. We continued to successfully execute on our transformation initiatives, launched a new brand campaign, and made significant progress on our next-generation platforms as we stay focused on creating long-term shareholder value.”
The company expects to extend the momentum into 2020. It anticipates fiscal 2020 revenue in the range of $15 billion, representing an increase of 7% from 2019.
Cash Returns are Safe
ADP has raised dividends in the past 44 consecutive years. In addition, the dividend growth rate stood in the double-digit range in the past three years. It currently offers a quarterly dividend of $0.91 per share, yielding above 2%. Its cash flows are completely covering the dividend payments. Moreover, the buyback plan of $5 billion indicates its confidence in cash generation potential.
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