Dissecting the Dividend Dynamics of Paychex Inc (PAYX, Financial)
Paychex Inc (PAYX) recently announced a dividend of $0.89 per share, payable on 2024-02-27, with the ex-dividend date set for 2024-02-12. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Paychex Inc's dividend performance and assess its sustainability.
What Does Paychex Inc Do?
Paychex Inc is a leading provider of payroll, human capital management, and insurance solutions servicing small and midsize clients primarily in the United States. The company, established in 1979, services over 740,000 clients and pays over 1 in 12 U.S. private-sector workers. Alongside its traditional payroll services, Paychex offers HCM solutions such as benefits administration and time and attendance software, as well as human resources outsourcing and insurance agency services.
A Glimpse at Paychex Inc's Dividend History
Paychex Inc has maintained a consistent dividend payment record since 1988. Dividends are currently distributed on a quarterly basis. Paychex Inc has increased its dividend each year since 2013, earning it the title of a dividend achiever, a distinction awarded to companies that have consistently raised their dividends for at least the past 11 years. Below is a chart showing annual Dividends Per Share to track historical trends.
Breaking Down Paychex Inc's Dividend Yield and Growth
As of today, Paychex Inc currently has a 12-month trailing dividend yield of 2.81% and a 12-month forward dividend yield of 2.89%, indicating an expectation of increased dividend payments over the next 12 months.
Over the past three years, Paychex Inc's annual dividend growth rate was 9.50%. On a five-year horizon, this rate decreased to 8.50% per year. However, over the past decade, Paychex Inc's annual dividends per share growth rate stands at an impressive 12.90%. Based on Paychex Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Paychex Inc stock as of today is approximately 4.27%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-11-30, Paychex Inc's dividend payout ratio is 0.77, which may suggest that the company's dividend is sustainable.
Paychex Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Paychex Inc's profitability 10 out of 10 as of 2023-11-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
Paychex Inc's growth rank of 10 out of 10 suggests that the company's growth trajectory is strong relative to its competitors. Paychex Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a robust revenue model. The company's revenue has increased by approximately 7.30% per year on average, outperforming approximately 56.82% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Paychex Inc's earnings increased by approximately 12.50% per year on average, outperforming approximately 52.49% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 10.30%, outperforms approximately 55.66% of global competitors.
Next Steps
Considering Paychex Inc's solid dividend payments, consistent dividend growth rate, prudent payout ratio, robust profitability, and promising growth metrics, the company stands out as a potentially attractive option for value investors focused on income generation. However, investors should always consider their individual investment goals and the overall diversification of their portfolios. For those looking to expand their income-generating assets, Paychex Inc warrants a closer look within the broader context of a well-rounded investment strategy. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
