Arsuron Papartassee

Automatic Data Processing: Better Suited to Survive This Downturn than Its Competitors

I understand that dividend are paid from cash flow, but if you fail to earn, you will deplete into your cash for dividend. As a more conservative investor, I look for risk/reward and constantly asking myself what am I willing to pay for this stock. Currently ADP appears to be a better bargain.
About inflation or deflation, I frankly don't really care and aren't too concern about it.
All I know is ADP is trading at a big discount relative to its past. Its future is unknown but I believe in reversion to the mean.

I'm going to look into PAYX.

These are great comments!

On Jul 20 12:44 PM maz wrote:

> Paychex is the better opportunity. You are correct on the dividend
> payout ratio but you pay dividends from cash not earnings - the cash
> payout ratio is still high but at 70% is better than the earnings
> payout ratio.
>
> A big key for Paychex & ADP is the inflation/deflation debate.
> Right now they are both earning very little off customer float and
> their own cash because interest rates are so low & a deliberate
> policy to preserve capital & maintain liquidity. Paychex interest
> income is less than half long term average on $4 billion cash (float
> + own cash). If you believe we're in for Japan like deflation this
> will continue for many years. If you believe that at some time -
> may be 2, 3 or 4 years - inflation will really take hold then these
> guys will get a big boost

Automatic Data Processing: Better Suited to Survive This Downturn than Its Competitors

I agree with all the comments. PAYX has no debt, but my concern is the risk of dividend cut. With payout ratio sitting at 86%, PAYX has little room to fall on earning basis before depleting into their cash. But 0 debt will allow them to borrow at a lower rate so it's also a plus. Now that I see so many interest on PAYX, I will do a research on that name shortly.

The 1982 case was just an example and I don't expect the stock to mimic that. They were not paying out dividend then so I wasn't able to see their yield then.

Thanks for all the constructive comments.

Stocks on My Watchlist: Apple, Google, Cardinal Health

archangelms:
It's true Google trades at lower P/E than Amazon and Yahoo. I stated clearly that I see Google as a proxy for corporate spending on advertising. I don't view Amazon and Yahoo as such. I don't feel jealous of anyone who made money in the stock. I never own Google before and do not considering the stock as an investment. For a P/E of 25+, may I suggest VIVO which performed just as well as GOOG. Take a look at this chart (picasaweb.google.com/l...)
The stock also pay great dividend with strong history of raising it.

reinharden & Timeline Strategy Consulting:
Great point you make on Apple growing top & bottom line. But something always beating analysts' estimate that have me skeptical. Based on CNBC earning central, Apple have been beating since 1Q06 (data.cnbc.com/quotes/A...). It may be longer than that, but it doesn't show. Over the past 2 quarters, the company beat estimate by more than 20%!!! (28% last quarter) and yet, the stock is trading below 2008 level when the biggest beat was 13.3% in 4Q08. The chart above tells me more than what balance sheet tells me.
Look, Apple make great products. In fact, I use ALL their products including laptops, phone, and networking appliance. I also urged everyone in my house to switch to Apple. I also would love to work for them, but as a stock, I do not want to have my money there.

Thank you for all your constructive comments.