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Bought ADP today
Old 04-19-2010, 09:25 AM   #1
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Bought ADP today

I'm at a loss as to why I've never owned this stock before. They are one of four AAA rated companies (along with Microsoft, Exxon, and Johnson&Johnson).

Their business is about as stable as they come. As long as people are getting paid for employment, they are going to do well.

They have a nice dividend that has been increasing at a decent pace.

What's not to like about this company?
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Old 04-19-2010, 10:50 AM   #2
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I've been long ADP since October 2008. Given its history and its (then current) 4% dividend yield with a long history of raising dividends, it seemed like a good defensive play to remain in equities while having reliable divvies as a cushion and perhaps a "floor" on the price as long as the dividends weren't significantly slashed.

Long JNJ also, for the record.

I don't buy many individual stocks, but I do have some Berkshire Hathaway and a handful of blue chip dividend stocks.
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Old 04-19-2010, 11:02 AM   #3
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Quote:
Originally Posted by Hamlet View Post
Their business is about as stable as they come. As long as people are getting paid for employment, they are going to do well.
Not exactly a secret. Wouldn't this insight already be figured into the current market price?
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Old 04-19-2010, 11:32 AM   #4
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I agree, ADP is a great company. I prefer them over their next competitor Paychex.

A benefit of their business is that they have a good idea of how the US economy is doing at all times.

The only thing I would worry about with ADP is if they get too greedy... They have to hold a lot of cash, and they may be tempted one day to try earning some excess returns off of that money instead of keeping it in t-bills and such. That is my only concern with their business.

I think software as a service, which in the broader sense is what they do, is a great business to be in.

ADP is a dividend aristocrat. I like JNJ as well, as was mentioned by Ziggy.

I like to buy individual stocks that are dividend aristocrats. The easiest way to screen for them is to simply look at the VIG ETF's holdings.
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Old 04-19-2010, 02:59 PM   #5
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I've owned their competitor Paychex PAYX for a number of years. Also a reliable dividend player, with a very capital efficient business (30-40% ROE). I really hadn't looked at ADP before. After comparing the twoit maybe the slightly better two of the stocks although they are very comparable. Of course a jobless recovery won't bode well for either coming.
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Old 04-19-2010, 04:48 PM   #6
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Keep in mind they will get a nice bump if interest rates start going back up. Whether or not ADP is attractive @ today's prices....meh
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Old 04-19-2010, 05:13 PM   #7
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Have ADP also. I figure that if employment is going up, they will get more business. For the record, I have all four of the AAA stocks without even realizing it.
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Old 04-19-2010, 05:30 PM   #8
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Our company ditched ADP as a service provider and went with ... Fidelity. Much, much less expensive and 401(k) plan was an order of magnitude less expensive as well.
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Old 04-19-2010, 07:31 PM   #9
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Maybe. They seem very reasonably priced to me at less than 17 times earnings, considering how strong and dependable their business is.

Quote:
Originally Posted by RonBoyd View Post
Not exactly a secret. Wouldn't this insight already be figured into the current market price?
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Old 04-19-2010, 07:35 PM   #10
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I haven't really seen anyone use ADP for 401k stuff. My experiences with them are just with the payroll stuff.

Did your company change payroll providers as well?


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Our company ditched ADP as a service provider and went with ... Fidelity. Much, much less expensive and 401(k) plan was an order of magnitude less expensive as well.
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Old 04-19-2010, 08:32 PM   #11
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Yes, as I wrote before, we use Fidelity now as our payroll provider. Fidelity has a big push to fill this space. ADP will probably lose business going forward. Did your research not turn up this kind of competition?

On the 401(k) front, ADP contracts with others to provide a 401(k) as part of their platform. They use high expense places like Morgan Stanley, et al.

I'm just saying that ADP has more competition than just Paychex.
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