(07-05-2014, 10:28 AM)Kerim Wrote: Nice. I've never put PAYX through the paces. I used to follow ADP, and think the business model has a lot going for it, but lost interest and dropped it after a while. Maybe I'll try to find some time to add them both to my watch list.
What inspired you to make that one number 36?
PAYX will benefit from the continued employment recovery and, when interest rates do increase it will benefit from the float - interest earned from the cash balances that back paychecks that have not yet been deposited.
Josh Peters at Morningstar's DividendInvestor newsletter has held it for quite some time and projects about a 6% dividend increase again this year, and 8% a year after that for a few years.
It is slightly overvalued now, which is why I bought a underweight position, but at a 3.4% yield and dividend increases that should be more than double the inflation rate I was ready to add it to my stable of dividend growth stocks. It is not entirely a defensive stock, and unlike some (utilities, for example) should benefit from the eventual increase in interest rates.
I plan to be very patient with it, and to make additions on dips should any occur.