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ADP is the market leader in the critical world of corporate payroll.
They earn stable, recurring revenue by handling essential tax and human capital management tasks like payroll and compliance.
ADP is an important partner for many businesses around the world - let’s dive into this Dividend King today!
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Automatic Data Processing, Inc.
Businesses around the world rely on ADP’s services.
It could be one of the most stable companies in the modern economy.
It’s got massive scale, serving over 1.1 million clients and paying over 42 million workers globally.
The company benefits from a powerful structural moat based on high switching costs and decades of built-up regulatory data and expertise.
It’s a strong generator of cash flow, with a history of growing capital returns for over 15 years.
But it’s also got some problems:
The business is sensitive to economic downturns, especially rising unemployment or slowing wage growth.
It faces an increasing risk of technological disruption from newer, leaner cloud platforms and advancing AI capabilities that could replace some of its offerings.
Its core business, which is highly reliant on scale, is in a fiercely competitive market.
Is this industry leader a buy? Let’s find out!
💰 Company name: Automatic Data Processing, Inc.
✍️ ISIN: US0530151036
🔎 Ticker: $ADP
📚 Type: Dividend Growth Stock
📈 Stock Price: $256.37
💵 Market cap: $101.1 billion
📊 Average daily volume: $503.5 million
Onepager
Don’t know Automatic Data Processing, Inc.?
Here are the basics:
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1. Do I understand the business model?
Automatic Data Processing, Inc. (ADP) is a global technology company that provides cloud-based Human Capital Management (HCM) solutions to businesses of all sizes.
They help businesses manage their workforce through an entire employment cycle - from hiring to retiring.
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The core service is payroll processing, but it also bundles other critical tasks like:
Talent acquisition and management.
Time and attendance tracking.
Benefits and compliance administration.
Tax filing, which involves handling $3.3 trillion in client funds in the U.S. annually.
ADP operates through two main segments:
Employer Services (ES): Offers a comprehensive range of global HCM technology and outsourcing services (other than PEO).
Professional Employer Organization (PEO) Services: A full-service Human Resources Outsourcing (HRO) solution, primarily run through ADP TotalSource, where ADP acts as a co-employer with its client’s worksite employees. This allows small and mid-sized businesses to offer services and benefits on par with larger enterprises.
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