ADP
Automatic Data Processing, Inc.
Technology · Software - Application · United States · Stock
Score Breakdown
Scored for Dividend Income profile
Sub-scores are 0–20 each; Model Score is weighted by your selected investment goal. How it works →
Why Ranked Here
- ADP scores very well on profitability and financial health, with a 25.8% operating margin, 19.8% net margin, and an interest coverage ratio of 11.6x, anchoring the composite score firmly in positive territory.
- The consistent multi-year dividend growth from $4.05 to $6.02 per share and a balanced 58.8% payout ratio earned a high dividend factor score, reinforcing the Dividend Candidate label.
- Moderate single-digit revenue and earnings growth, combined with the absence of any macro theme assignment, prevented the score from reaching the highest tiers despite strong fundamental quality.
Why Not Higher
- Growth remains solid but unspectacular — 7.1% revenue growth and 8.7% net income growth in FY2025 do not meet the accelerated pace the model's higher scoring tiers reward.
- The lack of any macro theme assignment means ADP receives no thematic tailwind score, leaving 20 potential points entirely uncaptured in the current model framework.
Data Confidence
9 / 10
Very High — full data coverage
Why This Score
Grounded in figures from this company's SEC EDGAR filings — not a restatement of the score itself.
Revenue grew from FY2024's $19,202,600,000 to FY2025's $20,560,900,000 (+7.1%), net income rose from FY2024's $3,752,000,000 to FY2025's $4,079,700,000 (+8.7%), and diluted EPS increased from FY2024's $9.10 to FY2025's $9.98 (+9.7%).
The model awarded a mid-range score, reflecting consistent but moderate single-digit growth across revenue, net income, and EPS — solid expansion, but not at the accelerated pace the model's higher tiers reward.
In FY2025, ADP posted an operating margin of 25.8%, a net margin of 19.8%, and a return on assets of 7.6%.
These metrics indicate a highly profitable business with strong cost discipline; the model rewarded the combination of a wide operating margin and healthy net margin, placing the score near the top of the profitability range.
In FY2025, ADP's interest coverage ratio (operating income divided by interest expense) stood at 11.6, against total assets of $53,369,300,000.
An interest coverage ratio of 11.6 in FY2025 signals that operating income comfortably exceeds interest obligations by a wide margin, which the model treats as a strong indicator of debt-service capacity and overall financial stability.
Over the last four reported quarters, revenue rose sequentially from $5,126,800,000 in 2025Q4 to $5,175,200,000 in 2026Q1, $5,359,300,000 in 2026Q2, and $5,939,200,000 in 2026Q3; net income climbed from $910,700,000 to $1,013,000,000, $1,062,000,000, and $1,359,800,000; and operating income advanced from $1,190,700,000 to $1,307,500,000, $1,383,200,000, and $1,781,800,000 across the same periods.
All three metrics show consistent sequential acceleration, with the most pronounced step-up occurring in 2026Q3; the model's mid-range score likely reflects that while the trend is positive, the earlier quarters showed more modest quarter-over-quarter gains before the recent acceleration.
ADP has grown its dividends per share each year from FY2022's $4.05 to FY2023's $4.79, FY2024's $5.45, and FY2025's $6.02, while maintaining a dividend payout ratio of 58.8% in FY2025.
The model rewarded the consistent multi-year dividend growth trajectory alongside a payout ratio that signals meaningful income return to shareholders without appearing unsustainably high, placing the score well above the midpoint of the dividend range.
ADP is not currently assigned to any of the 24 tracked macro themes.
The absence of a theme assignment means no thematic tailwind contributed to the score under the model's current methodology; this reflects the model's classification state and is not an indicator of the company's business quality.
Research Summary
AI-generated analysis reflects data and conditions as of the report date shown above. Verify any specific figures through primary sources before acting on this analysis.
Automatic Data Processing, Inc. (ADP) presents a compelling profile as a Dividend Candidate, combining consistent revenue and earnings growth with exceptional profitability and financial stability. In FY2025, revenue reached $20,560,900,000 (+7.1% year-over-year), net income grew to $4,079,700,000 (+8.7%), and diluted EPS climbed to $9.98 (+9.7%), while operating margins of 25.8% and a net margin of 19.8% underscore strong cost discipline. ADP's dividend per share has grown every year from $4.05 in FY2022 to $6.02 in FY2025, supported by a 58.8% payout ratio that balances shareholder returns with financial prudence. The company's interest coverage ratio of 11.6x and $53.4 billion in total assets further reinforce its very low risk profile.
Plain English
ADP is a large, highly profitable payroll and HR services company that steadily grows its revenue and earnings each year, pays a rising dividend, and carries very manageable debt — making it a reliable income-oriented holding rather than a high-octane growth play.
Bull Case vs. Bear Case
Bull Case
- ADP's dividend per share has risen every year from $4.05 in FY2022 to $6.02 in FY2025, with a 58.8% payout ratio that suggests the dividend is well-covered and has room to continue growing.
- Operating margins of 25.8% and a net margin of 19.8% in FY2025 reflect a highly profitable business with strong pricing power and cost discipline.
- Sequential quarterly momentum is accelerating, with operating income jumping from $1,190,700,000 in 2025Q4 to $1,781,800,000 in 2026Q3, signaling improving underlying business performance.
Bear Case
- Revenue and earnings growth, while consistent, remains in the single-digit range — FY2025 revenue grew just 7.1% and net income 8.7% — which may limit upside for investors seeking faster-compounding opportunities.
- ADP is not currently assigned to any of the 24 tracked macro themes, meaning no thematic tailwind is contributing to its model score, and it may be overlooked in momentum-driven or thematic investment strategies.
- Earlier quarters showed only modest sequential gains before the 2026Q3 acceleration, raising the question of whether the recent step-up is sustainable or reflects seasonal or one-time factors.
What Could Change the Picture
Bullish Triggers
- A sustained acceleration in quarterly revenue and earnings growth beyond the 2026Q3 levels could signal that ADP is entering a higher-growth phase, strengthening the case for multiple expansion.
- Assignment to one or more of the model's 24 tracked macro themes — such as AI-driven workforce automation or digital payroll infrastructure — could add meaningful thematic tailwind to the composite score.
Bearish Triggers
- A meaningful compression in operating margins from the current 25.8% level, driven by rising labor or technology costs, would challenge the profitability thesis that underpins much of ADP's investment appeal.
- A significant increase in the dividend payout ratio above the current 58.8% without corresponding earnings growth could raise sustainability concerns and signal financial stress.
Risk Profile
Very Low RiskADP's Very Low risk rating is supported by an interest coverage ratio of 11.6x in FY2025, indicating that operating income comfortably exceeds debt-service obligations by a wide margin. Sequential quarterly momentum across revenue, net income, and operating income has been consistently positive through 2026Q3, further reducing concerns about near-term financial deterioration.
This report is for educational and research purposes only. It does not constitute financial, investment, legal, or tax advice — always conduct your own due diligence before making investment decisions.