Automatic Data Processing, Inc. (NASDAQ: ADP) soon becomes ex-dividend

It looks like Automatic Data Processing, Inc. (NASDAQ: ADP) is set to be ex-dividend within the next four days. The ex-dividend date is one business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. It is important to know the ex-dividend date because any transaction in the share must have been settled by the registration date at the latest. Thus, you can buy Automatic Data Processing shares before December 9 in order to receive the dividend that the company will pay on January 1.

The company’s next dividend payment will be US $ 1.04 per share, and over the past 12 months the company has paid a total of US $ 4.16 per share. Last year’s total dividend payouts show that automatic data processing has a 1.8% return on the current stock price of $ 229.89. Dividends are an important source of income for many shareholders, but the health of the business is crucial to sustaining these dividends. You have to see if the dividend is covered by profits and if it increases.

See our latest analysis for automatic data processing

Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, then the dividend could be unsustainable. Automatic Data Processing paid out over half (59%) of its profits last year, which is a steady payout ratio for most companies. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. Over the past year, it has paid out 71% of its free cash flow as dividends, within the range typical for most companies.

It is positive to see that the automatic data processing dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a lower payout ratio. greater safety margin before the dividend is cut.

Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.

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Have profits and dividends increased?

Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. If profits fall enough, the company could be forced to cut its dividend. Luckily for readers, Automatic Data Processing’s earnings per share have grown 14% per year over the past five years. The automatic data processing pays out just over half of its profits, suggesting that the company is striking a balance between reinvesting in growth and paying dividends. Given the rapid rate of growth in earnings per share and the current level of payout, there may be a possibility of further dividend increases in the future.

Many investors will assess a company’s dividend performance by evaluating how much dividend payments have changed over time. Automatic Data Processing has generated dividend growth of 11% per year on average over the past 10 years. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.

To sum up

Should investors buy automatic data processing for the upcoming dividend? Higher earnings per share generally result in higher dividends for stocks that pay dividends over the long term. That’s why we’re happy to see Automatic Data Processing’s earnings per share increase, even though, as we’ve seen, the company pays more than half of its earnings and cash flow – 59% and 71% respectively. In summary, it’s hard to get excited about automatic data processing from a dividend perspective.

Have you ever wondered what the future holds for automatic data processing? Find out what the 18 analysts we follow are forecasting, with this visualization of its historical and future estimated earnings and cash flows

A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.


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