PAYX

[rnsmth]

Opened an underweight position on its drop last week - current yield 3.4%, last quarterly dividend increase 6%. Probably still a bit overvalued, but I have done all right buying good companies on drops like this one had this past week.

Up to 36 positions now, all dividend growers.

[Kerim]

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?

[rnsmth]

(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.

[Dividend Watcher]

(07-05-2014, 11:17 AM)rnsmth Wrote: 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.

Can't tell you the exact amount but I think more importantly, the float on withheld taxes that are not immediately deposited in the Treasury. Depending on the size of the employer, some are deposited within 3 days but for many small businesses, they're not required to be deposited until the end of the quarter. I can't remember if they do it monthly or quarterly for the quarterly payers that that's a significant time they hold the money.

Many paychecks are direct deposit nowadays.

[ChadR]

I've owned PAYX for a while now. Great starting yield and steady raises.

The float time on the taxes withheld depends on the size of the withholding from each company. Small companies can be end of the quarter or end of the month. Larger companies are 5 days. Payroll is pulled out the day before payroll so they have the payroll float for one day since nearly all companies are on direct deposit now.

[rnsmth]

PAYX announced an 8.6% dividend increase today, raising the forward yield to 3.6%