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Automatic Data Processing Stock Is Set to Extend The Rally

Automatic Data Processing stock

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.

ADP Automatic Data Processing, Inc. daily Stock Chart

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.

Automatic Data Processing Stock...

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

Automatic Data Processing Stock...

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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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.