Automatic Data Processing Announces Significant Dividend Hike

Automatic Data Processing (ADP) has declared a substantial increase in its quarterly cash distribution to shareholders. The human resources and payroll services provider is raising its payout by approximately 10.4%, bringing the new quarterly dividend to $1.70 per share. This move highlights the firm's robust financial health and its ongoing commitment to returning capital to investors.

This increase marks the 51st consecutive year in which ADP has raised its cash dividend, underscoring a remarkable legacy of shareholder returns. Based on a share price of $266.01 as of last Friday, the new annualized dividend of $6.80 per share implies a forward yield of roughly 2.6%.

The decision is supported by strong underlying business performance. For the fiscal year ending June 30, 2026, management has reaffirmed its adjusted earnings per share (EPS) guidance, projecting a range of $10.811 to $11.011. The company's fiscal first-quarter results already demonstrated momentum, with EPS of $2.49 surpassing consensus analyst estimates.

Should investors sell immediately? Or is it worth buying ADP?

Market Analysts Maintain a Cautious Stance

Despite the positive developments on dividends and earnings, the broader analyst community continues to exhibit a measured outlook on the stock. The average rating among coverage firms remains at "Hold," with a median price target of $312.67.

Some institutions have recently adopted a more conservative view. Wells Fargo, for instance, adjusted its expectations downward in late October, setting a price target of $272.00. The newly announced dividend increase may prompt fresh evaluation from these observers.

Investors are likely to focus on the upcoming release of the company's second-quarter fiscal 2026 results, expected in late January 2026. This report will be crucial in determining whether the positive operational trend established in Q1 can be sustained.