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.

August 25, 2008 - Automatic Data Processing, Inc. (ADP-NYSE) together with its subsidiaries, provides technology-based outsourcing solutions to employers, vehicle retailers, and manufacturers. It operates in three segments: Employer Services, Professional Employer Organization (PEO) Services, and Dealer Services.

The PEO Services segment provides small and medium sized businesses with 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.

The Dealer Services segment offers integrated dealer management systems and business solutions to automotive, heavy truck, and power sports vehicle retailers in the United States, Canada, South Africa, Asia, and Europe.This segment also provides a suite of Web-enabled business solutions to address each department and functional area of the dealership; an IPtelephony system that helps dealerships with their sales processes and business development initiatives; and computer hardware, hardware maintenance services, licensed software support, system design, and network consulting services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.

There are several appealing elements in this stock to beckon Conservative investors. First, debt is only 1% of the balance sheet. Second, the dividend yield is decent at 2.6%. Third, the company carries an A++ Financial Strength rating from Value Line. Fourth, the stock has a very low Beta of .75, meaning it moved only 75% as much as the S&P 500 index over the last year. While the stock price hasn't varied significantly in 5 years, that may be the stock's most attractive element since the market has seen high volatility.

Earnings are solid at ADP but haven't grown much in the last several years. Annual profit per share was $1.79 in 2005, then $1.85, followed by $1.83. In 2008, they jumped to $2.20. Fiscal year ends June 30. This year analysts predict $2.45. Over the last 5 years, earnings increased by 3.5% a year, on average. In the next 5, analyst see that number improving to 10%.

A big part of the increase may come from a major stock buy back program announced on August 14. ADP will buy almost 10% of its outstanding shares. It's finishing the last stock purchase effort, looking to pick up 8.6 million shares. On top of that, the company said it will buy another 50 million shares. With current outstanding stock at 513.9 million, the two programs absorb almost 10%. To make those buys takes about $2.6 billion. There's $1.6 billion sitting in the bank with only $52 million in long term debt against it. The remaining $1 billion needed to finish the acquisition can easily come from free cash flow. But remember that buy backs can stop at any time, and the total stock purchased doesn't always match the original announcement.

On the revenue side, in the last 5 years, they've improved by 6.5% a year, on average, going from $8.5 billion in 2005 to $8.78 billion last year. Revenues took a hit in 2007, droppping from $8.88 billion to $7.8 billion. In fiscal 2008, revenues jumped by 12.5% even with a slow U.S. economy and low interest rates for funds held for payroll clients. There was a 20% increase in sales in the PEO group, 9% in Employer Overseas, and 8.5% in Dealer Services. Earnings jumped 20% on a year over year basis.

More numbers: P/E ratio is 18.8. Price to Sales is 2.64 with Price to Book at 4.56. Profit margin is a healthy 14% with an Operating margin of 19.67%. Return on Equity is a remarkable 22.7%. The dividend is $1.16 for the year, giving a yield of 2.6%. That takes 47% of profits to pay. Next dividend pay date is October 1 for shareholders of record on September 10.

There's nothing exciting about ADP. It's fairly valued. There are no near term catalysts foreseeable that will give the stock a bump. But solid earnings and a strong buyback program will help support this stock. And that combination along with a very low beta of .75 may make conservative investors feel very comfortable.

- Company Web site: www.adp.com

- Ted Allrich