4. Automatic Data Processing (ADP)
ADP provides back-office services such as payroll processing, tax and benefits administration, and human-resource services. The company has a great competitive moat; once a client is onboard, switching costs are huge, so client retention rates are upward of 90%.
In the past five years, ADP has grown EPS 12% a year to $2.52 in fiscal 2011 (ended June 30). The balance sheet is also solid. ADP sits on $1.8 billion of cash and has virtually no debt, enabling it to pay out 56% of earnings as dividends. In addition, dividends have improved for 36 consecutive years. The last increase was in November 2010, when ADP raised payments 6% to a $1.44 annual rate, so another hike is likely before year-end. ADP trades at a P/E ratio of 19 and yields 2.9%.Risks to consider: Exxon's earnings are cyclical, while Johnson & Johnson has been hurt by product recalls. However, all of these stocks have stockpiles of cash, low debt and superior records of dividend growth. Action to take --> All four of these companies are exceptionally creditworthy, which means they can meet their financial obligations with no trouble. They are also the only four names still standing in Standard & Poor's select list of "AAA" ratings. My top pick is Microsoft because of its consistent high EPS growth and low P/E ratio. But any of these four names are attractive, based on their combination of safety and high yields. Disclosure: Neither L. Springer nor StreetAuthority, LLC hold positions in any securities mentioned in this article. Also see:
2 Dividend Stocks for a Global Megatrend
3 Small Stocks with 7%-Plus Dividends
12 Companies that Could Go Bankrupt Very Soon
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV