There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

May 17, 2010 - Automatic Data Processing, Inc. (ADP-NYSE) provides technology-based outsourcing solutions to employers, vehicle retailers and manufacturers. It operates in three segments: Employer Services, Professional Employer Organization Services, and Dealer Services.

The Professional Employer Organization Services segment provides employment administration outsourcing solutions, including payroll, payroll tax filing, HR guidance, 401(k) plan administration, benefits administration, compliance services, health and workers' compensation coverage, and other supplemental benefits for employees primarily in the United States.

The Dealer Services segment offers integrated dealer management systems (DMS) and other business management solutions to automotive, heavy truck, motorcycle, marine, recreational vehicle, and heavy machinery retailers in North America, Europe, South Africa, and the Asia Pacific region. This segment also provides a suite of additional integrated applications to address department and functional areas of a dealership, including customer relationship management applications, front-end sales and marketing/advertising solutions, and an IP Telephony phone system integrated into the DMS to help dealerships drive sales processes and business development initiatives, as well as offers computer hardware, hardware maintenance services, software support, system design, and network consulting services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.

Earnings will be flat this year at $2.39, according to the consensus of 20 analysts (though the range is between $2.32 and $2.54). Next year, they see $2.53. Over the last 5 years, earnings grew annually at the rate of 7.65%. Analysts predict the next 5 years will show an average annual increase of 11.88%. For the June quarter (fiscal year ends in June), look for 42 cents a share, down from 49 cents in the last quarter of 2009. For the first quarter of 2011 (ends in September), analysts expect 56 cents, even with this year's first period.

ADP's growth partly depends on employment. The more people are employed, the more payrolls there are to process. But that isn't the company's only service. Its other divisions are doing well. That's reflected in total sales which have grown despite these troubling times. Last year, they were $8.87 billion, up from $8.77 billion in 2008. This year anlaysts think they'll be flat, then up 3.6% in 2011 to $9.19 billion. If the economic recovery holds and employment increases, expect these numbers (and earnings) to be revised higher.

In tough times, there are always opportunities. ADP is buying other companies, recenlty adding four to its Employer Services division. These should put another $10 million on total revenues and be dilutive this year by about a penny a share. Of course, with extremely low debt levels and a high cash position, the company has great flexibility for buying larger firms that could be much more meaningful for growth. Along with purchases, the company is investing in new product development.

As mentioned above, the company has a little over $2 billion in cash. That's almost $4.00 a share. With that much money, investors can count on the dividend being solid (it takes about 54% of earnings to pay). But it also suggests the company can increase the dividend, buy back shares or go on an acquisition spree without worrying about how it will finance any or all of them simultaneously.

More numbers: P/E is 15. Price to sales ratio is 2.3. Price to book is 3.44. Book value is $11.81. Operating margin for the last 12 months was 21.28%. Profit margin was 15.29%. Return on Equity was a notable 24.70%. Return on assets was 3.68%. There are 502.99 million shares outstanding. Insiders own .16% of the stock. Institutions have 76.70%.

Conservative investors should like this stock. Some valuations are already high, but this company delivered decent growth and earnings over the last couple of years, ones that were troubling for most companies.

Company Web site: www.adp.com

Ted Allrich