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 The Dividend Kings are a selective group of stocks that have increased their dividends for at least 50 years in a row. We believe the Dividend Kings are among the highest-quality dividend growth stocks to buy and hold for the long term.With this in mind, we created a full list of all the Dividend Kings. Automatic Data Processing (ADP) is a new member of the Dividend King list. This article will discuss the company’s business overview, growth prospects, competitive advantages, and expected returns.
 Business OverviewAutomatic Data Processing (ADP) is a global leader in business outsourcing services, specializing in payroll processing, human resources technology, and other business operations solutions. Founded in 1949, ADP serves over 700,000 corporate clients worldwide, offering innovative and reliable tools to streamline workforce management. The company has established itself as a trusted partner for businesses of all sizes, leveraging its extensive expertise and technology-driven approach.With a market capitalization of $121 billion and generating approximately $18.2 billion in annual revenue, ADP is a financially robust enterprise. It has consistently rewarded shareholders with 50 consecutive years of dividend growth, making it a prestigious member of the Dividend Aristocrats Index and the Dividend King list. This track record highlights ADP’s stability, strong cash flow, and long-term commitment to growth and shareholder value.ADP reported a robust start to fiscal 2025, with first-quarter revenue increasing 7% to $4.8 billion, reflecting strong organic growth. Net earnings rose 11% to $956 million, while adjusted EBIT grew 13% to $1.2 billion, resulting in a 130-basis-point increase in adjusted EBIT margin to 25.5%. Diluted EPS increased 13% to $2.34, with adjusted diluted EPS up 12% to $2.33. The company credited strong new business bookings, higher client revenue retention, and increased client funds interest revenue for its performance.Strategic growth initiatives included the acquisition of WorkForce Software for $1.2 billion, expanding ADP’s workforce management solutions for large, global enterprises. The introduction of ADP Lyric HCM, a flexible and intelligent global HR platform, positions ADP to enhance its offerings for enterprise clients. Following the acquisition, ADP updated its fiscal 2025 guidance, forecasting revenue growth of 6% to 7% and adjusted EPS growth of 7% to 9%.Segment highlights included a 7% revenue increase in Employer Services, driven by a 2% rise in U.S. pays per control and a 260-basis-point margin expansion. PEO Services revenue also grew 7%, supported by a 3% increase in average worksite employees, though segment margin declined by 80 basis points. Additionally, interest on funds held for clients rose 26% to $253 million, reflecting higher average balances and yields. These results underscore ADP’s commitment to driving financial performance and innovation.Source: Investor Presentation
 Growth ProspectsADP’s growth prospects are supported by its strong market position in human capital management (HCM) solutions and its continued investment in innovative technologies. The company’s recent acquisition of WorkForce Software expands its workforce management capabilities for large, global enterprises, enhancing its competitive edge in the enterprise market. Additionally, the launch of ADP Lyric HCM, a flexible and intelligent global HR platform, signals ADP’s focus on addressing the evolving needs of its clients by offering comprehensive and user-centric solutions. These strategic moves position ADP to capture new business opportunities and maintain its leadership in the HCM industry.The company’s financial stability further supports its growth potential. With consistent revenue growth, strong margins, and a robust balance sheet, ADP is well-positioned to pursue further acquisitions and strategic investments. Its diverse client base of over 700,000 businesses provides a steady revenue stream while rising demand for payroll and HR outsourcing creates opportunities for organic growth. Additionally, ADP benefits from increasing interest on funds held for clients, contributing to higher margins and incremental income.ADP’s long-term growth is also tied to macroeconomic trends, including rising global demand for workforce automation and data-driven HR solutions. The shift toward remote work and global workforce management presents new opportunities for ADP to expand its services. By leveraging its technological expertise, extensive data resources, and proven ability to innovate, ADP is well-positioned to sustain growth, expand its global footprint, and deliver continued value to its shareholders.Source: Investor Presentation
 Competitive Advantages & Recession PerformanceADP’s competitive advantages derive from its strong market position, extensive client base, and innovative technology solutions. Serving over 700,000 businesses globally, the company benefits from scale and diversification, reducing dependency on any single market or client. Its comprehensive suite of payroll, HR, and workforce management solutions offers businesses seamless integration and efficiency, making ADP a preferred provider in the human capital management (HCM) space. Additionally, ADP’s data-driven insights and unmatched client funds investment capabilities further differentiate it from competitors.ADP has proven its resilience during economic downturns, supported by its recurring revenue model and essential service offerings. Businesses continue to rely on payroll and compliance solutions regardless of economic conditions, ensuring a steady income stream for ADP. The company’s ability to maintain high client retention rates, even in challenging times, highlights its trusted reputation and the stickiness of its services.During recessions, ADP’s diversified portfolio and focus on operational efficiency help mitigate risks. For example, while slower employment growth may temporarily impact its client base, ADP’s investment in technology and cost-saving solutions for businesses ensures continued demand for its services. This combination of financial stability and adaptability enables ADP to weather economic challenges while maintaining long-term growth prospects.During the Great Recession of 2008-2009, it steadily grew earnings-per-share each year in that time:

Valuation & Expected Total ReturnsADP shares currently trade at $297. Using our earnings-per-share estimate of $10.00, we see that the stock has a price-to-earnings ratio 29.7x for the current fiscal year. This is above our fair value estimate P/E ratio of 29x.If the valuation multiple were to revert to our fair value estimate in the next five years, the company’s total returns would see annual returns decline by 0.5% per year. ADP shares have performed well for an extended period. While this has rewarded shareholders with strong returns, we view ADP as a slightly overvalued stock.Aside from changes in the P/E multiple, ADP should also generate returns from earnings growth and dividends. A projection of expected returns is below:

In this scenario, ADP is projected to generate a total return of 10.5% per year over the next five years.
 Final ThoughtsThe company has performed well and has had high total returns in the past five years. We find the company’s dividend track record impressive, with the most recent dividend hikes of 10%.ADP is a safe, defensive stock during economic hardship; our projected total return profile meets our criteria for a buy recommendation when the total return is over 10% annually for the next five years. As a result, we rate it a buy at the current price.More By This Author:3 Utility Stocks For Safe Dividends 3 Healthcare Stocks For Long-Term Growth And Dividends3 Small-Cap Dividend Stocks With Yields Above 3%