Yahoo Finance Paychex Inc's Dividend Analysis
Exploring the Sustainability and Growth of Paychex Inc's Dividends
Paychex Inc (NASDAQ:PAYX) recently announced a dividend of $0.98 per share, payable on 2024-05-30, with the ex-dividend date set for 2024-05-09. 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?
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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. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 11 years. Below is a chart showing annual Dividends Per Share for tracking 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 2.93% and a 12-month forward dividend yield of 3.22%. This suggests 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%. Extended to a five-year horizon, this rate decreased to 8.50% per year. And 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 4.41%.
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 2024-02-29, Paychex Inc's dividend payout ratio is 0.78. And this may suggest that the company's dividend may not be 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 2024-02-29, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Paychex Inc's growth rank of 10 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Paychex Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Paychex Inc's revenue has increased by approximately 7.30% per year on average, a rate that outperforms approximately 50.71% 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, a rate that outperforms approximately 48.35% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 10.30%, which outperforms approximately 52.18% of global competitors.
Next Steps
In conclusion, while Paychex Inc demonstrates strong dividend growth and robust profitability, investors should closely monitor the payout ratio and ongoing financial performance to ensure long-term sustainability. The company's solid growth metrics and strategic market position may continue to support its dividend payments, making it an attractive option for income-focused investors. For those looking to explore further, 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.
This article first appeared on GuruFocus.
