Year-to-date gains: 38%
Dividend yield: 3.3%
Payroll provider Paychex (PAYX) has given investors a lot to like over the last year or so, with its sweet payout serving as the cherry on top.
PAYX beat expectations in the most recent quarter thanks to both rising U.S. employment and its expansion into international markets. The company snatched up German payroll firm Lohndata, for example, is expanding its services in South America and just announced a move toward cloud accounting via an equity investment in Canadian firm Kashoo.
Paychex has also been sweetening its quarterly payout in recent years, with a 6% hike coming in August. The resulting 35-cent quarterly payout is triple what Paychex was paying a decade ago translates to a forward yield of 3.3%.
It does make for a high payout ratio, but investors should find comfort in the fact that Paychex historically has higher free cash flow per share than it does earnings per shares, and the fact that earnings are on tap for double-digit annual growth over the next half-decade as it is.