Company Description
Paychex, Inc. is a leading national provider of payroll, human
resource, and benefits outsourcing solutions for small- to
medium-sized businesses. The company offers comprehensive payroll
services, including payroll processing, payroll tax
administration, and employee pay services, including direct
deposit, check signing, and Readychex®.
[Source: Company Press Release]
Reasons to Invest:
No matter where you're from there is generally two days a month
that most people look forward too. Nine times out of ten those
two days are the first and the fifteenth of every month,
otherwise known as payday. What's a better way to celebrate
payday than to spotlight a company that divvies out the checks.
This weeks Drip of the Week is Paychex Inc. (NASDAQ:PAYX). Over
the first three quarters of this year Paychex Incorporated's
revenues rose 22% to $309.3M. Their Net income rose 6% to
$80.3M. The company announced that their revenues reflect the
addition of new clients and price increases. PAYX's net income
was partially offset by higher personnel costs. An increase of
more than 20% is very attractive for a company like Paychex
Incorporated.
A quick look at the stock price history and one would see that
the 52-week change for PAYX is 47.29 percent, so this stock is
definitely a mover and a shaker. If you take that change and
compare it relatively to the S&P 500 one would note a 52-week
change of 18.23%. At the end of Friday's (10/03/03) session PAYX
closed at 35.53, or 2.79% higher.
In 2000 PAYX broke over the 60 level and since then it has been
on a downward spiral. I bet your asking why spotlight a stock
that has been on a downtrend for the past three years?
At its current level, PAYX looks like a healthy choice for
several reasons. First of all, the 30 level was strong short
term resistance at the end of 2002 and for most of this year.
Now that the stock has broken over the 30 level, we feel that the
old resistance of thirty should turn into new support, carrying
the stock higher. Secondly, PAYX's only real competitor is
Automatic Data (NYSE:ADP) and they are also doing very well at
the moment. Furthermore, the Labor Department announced this
morning that the unemployment rate managed to stay at 6.1% for
the month of September. Not only that, but the job market posted
a net gain of 57,000 jobs. Keeping that in mind, whom do you
think is going to write the checks for these new employees? Of
course their bosses write the checks, but PAYX supplies the paper
(or digital check) that their checks are written on.
If a climbing economy isn't enough to convince you that PAYX is
an ideal DRIP, maybe this will. Paychex Inc. announced yesterday
(10/02/03) that they were increasing their dividend from $0.11
cents per quarter to $0.12 per quarter. Shareholders on record
before November 3rd, 2003 will be able to cash in on this new
dividend increase November 17th, 2003. PAYX's annual dividend is
now $0.48 per share, and their dividend yield is 1.38 percent.
Also noteworthy is an article from the company posted back on
July 14th, 2003. Paychex Inc announced that they had added a new
profit-sharing feature to their 401(k) plan. The new
comparability option targeted employers who wanted to maximize
their retirement contributions by offering them the flexibility
to determine the plan's allocation method. Paychex said this
type of plan could be designed to provide higher contributions as
a percentage of compensation to a particular employee or group of
employees.
In respect with growth rates, PAYX is estimating a dividend
percentage of 4.76 percent over the next year. Over the next
three years they are estimating a dividend percentage of 25.99
percent. Now for you long term stockholders (BIG GRIN), over the
next five years, PAYX is forecasting a dividend percentage of
34.49 percent. If you ask me, this is a very impressive and
attractive forecast, albeit it is just a forecast.
This concludes another exciting episode of the Drip of the Week.
Stay tuned next week, for another DRIP worthy of the
DripAdvisor.com limelight.
Until Next Week,
Nich Sheldon
Editor
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Broker Recommendations
Strong Buy 3
Buy 2
Hold 16
Sell 2
Strong Sell 2
Brokers Covering 25
DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes
Min/Max Investment = $100-$10,000/Quarter
Reinvestment Fees -
Dividend investment fees: None
Cash investment fees: None
Auto reinvestment fees: None
Transfer Agent:
American Stock Transfer
800-937-5449
Corporate Headquarters:
911 Panorama Trail South
Rochester, NY 14625
Phone: (585) 385-6666
Fax: (585) 383-3428
