Labor Day Naturally Focuses Investor Attention on Paychex

When saluting the American worker for Labor Day, investors should also look to finance those companies that best provide services to the sector such as Paychex PAYX. A previous article on Benzinga was bullish on Paychex. That played out as Paychex is up for the last month, quarter, six months, and year of market action. But it is down more than 6 percent for 2014.

Investors should view any declines as buying opportunities to establish a long term position in Paychex at a discount.

Due to The Great Recession and The Affordable Care Act, or ObamaCare, companies are relying more on staffing services. That is increasing business for Paychex which is showing up in the earnings growth. For the past five years, earnings-per-share rose by 2.90 percent for Paychex. This year, earnings-per-share growth is up 9.60 percent. Over the next five years, earnings-per-share growth is expected to jump by 9.62 percent. That is a very bullish trend for Paychex.

The dividend will add to the total return for the shareholders of Paychex.

At present, the dividend yield for a member of the Standard & Poors' 500 Index SPY is just under 2 percent. For Paychex, it is over 3.6 percent. Paychex also has a history of increasing the amount of its dividend. When that happens, shareholders get a raise just for not selling!

The balance sheet and income statement are very compelling, too.

Paychex has no debt and a profit margin of 24.90 percent. That is a nice combination that protects the dividend yield and allows for the company to grow. This also had much to do with its return-on-equity of 35.60 percent, which is also much higher than the average company on the Standard & Poor's 500 Index.

Now trading around $41.65, the mean analyst target price over the next year of market action for PayChex is $42.46.