If you collect a paycheck, electronic or other, there’s a one in six chance it comes from a company created in 1949 by brothers Joe and Henry Taub. They called it Automatic Payrolls, Inc. but there was nothing automatic about it. It was a manual payroll processing business that started small. Now, 75 years later, it employs 64,000 people of its own and brings in over $19 billion in annual revenue. They could very well be working with your own company’s Chief People Person, and they won’t stop until the problems experienced by a young Milton Waddams are eradicated.
On November 6, 2024, this bastion of the workplace announced its 50th consecutive annual increase to their quarterly dividend. We have another Dividend King, and it joins the Royal Dividends Empire.
All hail Automatic Data Processing, Inc!
Say My Name
Like Walter Hartwell White felt more comfortable with ‘Heisenberg’, I cannot be certain if ADP even really uses their full name anymore. I see no reference to Automatic Data Processing in their press releases or other web content. I do see where they have trademarked, ‘Always Designing for People’. Clever, but really, it may as well stand for Automatic Dividend Payor because 50 years is impressive, and it isn’t just the consistency. These are not nominal increases; the average annualized increase over the last decade has been 15% (this last increase still a whopping 10%).
“It’s an exciting time as we mark our 50th consecutive year of dividend increases and celebrate 75 years of being at the forefront of workforce innovation. We are proud to be included among the elite group of ‘Dividend Kings’, who have a history of increasing dividends for at least 50 consecutive years, and we remain focused on continuing to deliver strong results for our shareholders.” – Maria Black, President and CEO of ADP
Referencing ‘Dividend Kings’ is a great sign of a shareholder friendly business. But what exactly is their business?
According to Charles Schwab:
Automatic Data Processing, Inc. engages in the provision of cloud-based human capital management (HCM) solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. This segment’s offerings include RUN Powered by ADP, a software platform for small business payroll, HR management, and tax compliance administration; ADP Workforce Now, a HCM solution used across mid-sized and large businesses to manage employees; and ADP Vantage HCM, a solution for HR management, benefits administration, payroll services, time and attendance management, and talent management. The PEO Services segment provides HR and employment administration outsourcing solutions under ADP TotalSource name to businesses through a co-employment model. The segment also provides employee benefits, protection and compliance, talent engagement, expertise, comprehensive outsourcing, and recruitment process outsourcing services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.
ADP becomes the 12th Dividend King from the Industrials sector. Below is a list of all the Kings in the Industrials sector and the industry in which they conduct their business.
| Company | Ticker | Industry |
| ABM Industries Inc | ABM | Environmental & Facilities Services |
| Automatic Data Processing Inc | ADP | Human Resource & Employment Services |
| Dover Corp | DOV | Industrial Machinery & Supplies & Components |
| Emerson Electric Co | EMR | Electrical Components & Equipment |
| Gorman-Rupp Co | GRC | Industrial Machinery & Supplies & Components |
| W.W. Grainger Inc | GWW | Trading Companies & Distributors |
| Illinois Tool Works Inc | ITW | Industrial Machinery & Supplies & Components |
| MSA Safety Inc | MSA | Office Services & Supplies |
| Nordson Corp | NDSN | Industrial Machinery & Supplies & Components |
| Parker-Hannifin Corp | PH | Industrial Machinery & Supplies & Components |
| Stanley Black & Decker Inc | SWK | Industrial Machinery & Supplies & Components |
| Tennant Co | TNC | Industrial Machinery & Supplies & Components |
Charles Schwab and Royal Dividends prefer to use S&P Global, Inc.’s Global Industry Classification Standard (GICS) to define a company’s sector and industry, but it isn’t perfect. ADP does not really seem like an ‘Industrial’ and their industry stands alone in the table above. In fact, Yahoo! Finance does not use the GICS, and they have the sector as ‘Technology’ and the industry as ‘Software – Application’. ADP is a sneaky way to add a technology stock to one’s portfolio.
It’s also a way to add a bit of an insurance company to a portfolio. ADP receives funds from its clients to safely hold until those funds are dispensed as compensation to the employees of those clients. On ADP’s books, the funds look like a massive amount of short-term debt. But those client obligations behave more like insurance float. ADP can place those funds in low-risk investments to generate additional income for itself.
ADP has been on a multi-month move upward and recently gapped up on an excellent quarterly earnings report. By all accounts, ADP appears to be fairly valued, perhaps even overvalued. It likely won’t be in the weekly Top Ten ranking anytime soon, but this is a great company to add to the Empire. Incredibly, this very morning, I heard two fellows on the street talking about it:
Gentleman #1: “You down with ADP?”
Gentleman #2: “Yeah, you know me.”