Automatic Data Processing (ADP) stocks cross the 2% yield mark

Llooking at the universe of stocks we cover at Dividend Channel, in Wednesday’s trading, shares of Automatic Data Processing Inc. (Ticker: ADP) were selling above the 2% mark based on its quarterly dividend (annualized at $4.16), the stock changing hands as low as $198.39 on the day. Dividends are particularly important for investors to consider because historically, dividends have provided a sizable portion of total stock market return. To illustrate, say for example that you bought shares of the S&P 500 ETF (SPY) on 12/31/1999 – you would have paid $146.88 per share. Fast forward to 12/31/2012 and each share was worth $142.41 on that date, a decrease of $4.67/share over all those years. But now consider that you received a whopping $25.98 per share in dividends over the same period, for a positive total return of 23.36%. Even with dividends reinvested, this only represents an average annual total return of around 1.6%; thus, by comparison, collecting a return above 2% would seem considerably attractive if that return is sustainable. Automatic Data Processing Inc. (Symbol: ADP) is an S&P 500 company, giving it special status as one of the large cap companies that make up the S&P 500 Index.

In general, dividend amounts are not always predictable and tend to follow the ups and downs of each company’s profitability. In the case of Automatic Data Processing Inc., reviewing the ADP historical chart below can help determine if the most recent dividend is likely to continue and, therefore, whether it is reasonable. to expect an annual return of 2%.

ADP has been increasing its dividend for more than 20 consecutive years. For more dividend growth stocks see our List of Dividend Aristocrats on the dividend channel.

Click here to find out which 9 other dividend-paying stocks have recently gone on sale »

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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