Payroll and HR outsourcing firm Paychex (PAYX) services more than 500,000 small and medium business clients worldwide. That's at least part of the reason why this stock has had such a low profile in recent years -- it's still seen as having too much exposure to the convalescing jobs market. Someone should tell that to Paychex, though; the firm has seen stair-step revenue and profit growth in the last few years.
Paychex has traditionally been a payroll company, providing services for small and medium-sized businesses that wanted to simplify the process of getting employees paid and taxes sorted. But PAYX has unlocked a profitable niche in the HR outsourcing business, upselling everything from 401(k) record-keeping to workers' compensation administration to its existing customer Rolodex.>>5 Stocks Poised for Breakouts While margins from the firm's float income (the interest income it earns by holding clients' cash until employees withdraw it) have slipped by a few points thanks to low interest rates, Paycheck is still on solid footing from a financial standpoint. The firm currently pays out a 32 cent dividend each quarter that adds to a 3.91% yield. I think that Paychex looks likely to hike that payout next quarter after four straight 32-cent payouts in a row. Paychex also shows up on recent lists of Tech Stocks That Pay Big Dividends and Dividend Stocks to Consider in Lieu of Bonds.
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