This Dividend Stock Just Beat Earnings And Is Still A Long-Term Buy
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Current Price: $270.62
Quarterly Dividend: $1.70
Automatic Data Processing (ADP) delivered another impressive quarter to close out its fiscal year, posting a double earnings and revenue beat that sent shares higher.
While the rally has pushed the stock’s forward valuation to roughly 22–23x earnings, reducing its margin of safety, I still believe ADP remains one of the highest-quality dividend growth companies available.
Although the stock isn’t nearly as attractive as it was during April’s pullback, the combination of recurring revenue, expanding margins, aggressive share repurchases, strong free cash flow generation, and an AA-rated balance sheet continues to support attractive long-term returns.
Previous Buy Thesis 📚
I previously initiated a Buy rating on ADP, believing the company offered compelling long-term upside despite trading near fair value.
At the time, investors were becoming increasingly concerned that artificial intelligence would eventually disrupt payroll and human capital management providers. However, I viewed AI as a long-term opportunity rather than a threat.
My thesis centered around several strengths:
Exceptional recurring revenue
Strong balance sheet
Robust free cash flow generation
Consistent dividend growth
Ongoing share repurchases
AI integration creating new growth opportunities
Since then, ADP has modestly outperformed the S&P 500, validating the investment thesis.
Quarter Of Strong Execution 💪🏾
ADP once again exceeded expectations in fiscal Q4.
