Some Technology Stocks You Might Miss

ADP is a long-term holding with a solid dividend story

When people think “technology” companies, they often think Microsoft, Apple, Cisco, Intel, and IBM. But that is just one small subset of the good technology companies. I have been a long-term investor in ADP.

I received the following message from Seeking Alpha this morning: “Automatic Data Processing (NASDAQ:ADP) declares $0.91/share quarterly dividend, in line with previous. Forward yield 2.7% and payable Oct. 1; for shareholders of record Sept. 11; ex-div Sept. 10.”

Automatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide. It operates through two segments, Employer Services and Professional Employer Organization (PEO) Services. ADP Investor’s Link: ADP

The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. Its offerings include payroll, benefits administration, talent management, HR management, workforce management, insurance, retirement, and compliance services.

The PEO Services segment provides HR outsourcing solutions through a co-employment model. This segment offers protection and compliance, talent engagement, comprehensive outsourcing, and recruitment process outsourcing services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.


There are risks, but I think they are just COVID-19 specific

ADP has a great business model and when they gain a customer it is likely they will be keeping that account. Furthermore, ADP has a proven track record of growing their dividend for 44 years. To put that in perspective, that means ADP has been increasing their dividend since I was 25 years old.

The Dividend Story

In the case of ADP, Seeking Alpha’s model suggests the dividend might not be sustainable. However, I believe the payout ratio is acceptable. Also, as I mentioned before, pay attention to what the business does with their dividend during a downturn. The years to remember for recent history are 2008-2009. Going forward, the years to remember will include 2020. ADP has handled past difficult economic climates without suspending or reducing the dividend.

I didn’t sacrifice investment growth on the dividend altar.

Full Disclosure

We own 100 shares of ADP and I have no intention of selling my shares.

Automatic Data Processing Seeking Alpha link: ADP