From 24/7 Wall St. · Chris Lange · · 1m
Paychex Dividend Growth Slowing
Paychex's dividend growth may slow as safety margin shrinks.
In brief
Paychex's dividend growth may slow as safety margin shrinks. Paychex's 4.3% dividend is safe but its payout buffer is shrinking, so future increases will likely match earnings growth rather than exceed it. Originally reported by 24/7 Wall St..
Dividend History
Paychex has raised its dividend every year since 2020 with a 10% increase to $1.19 per share.
Current Dividend Yield
The stock's forward yield is 4.3% with shares at $111.20 and a $4.76 annual payout.
Cash Flow Coverage
Dividends use 68% of free cash flow, 90% of net income, and 86% of fiscal 2026 EPS.
Paycor Debt Pressure
Paychex took on $5 billion in borrowings for Paycor with $4.6 billion in debt against $1 billion in cash.
Competitor Comparison
ADP pays 50% of free cash flow in dividends with room for buybacks, while Paycom relies on buybacks.
Future Dividend Outlook
Fiscal 2027 guidance assumes flat employment levels with no signs of recession.
The main idea
Paychex's 4.3% dividend is safe but its payout buffer is shrinking, so future increases will likely match earnings growth rather than exceed it.
