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Paychex Raises Dividend by 6.5% Despite Mixed Q3 Results

Paychex Inc. (PAYX) is a leading provider of integrated human capital management solutions and human resources, payroll, benefits and insurance services for small- to medium-sized businesses in the United States. The company serves more than 670,000 payroll clients, paying one out of every 12 American private sector employees.

The company generated 76.2% of its revenue from Management Solutions, 22.5% from PEO and Insurance Solutions and the rest from Interest on Funds Held for Clients during the quarter ended February 28, 2021. While most of the company’s business is in the United States, the company also has operations in Europe.

Fiscal Q3 Results Hit by COVID-19

Paychex reported fiscal third quarter revenue that fell 2.6%, in-line with analyst estimates, along with non-GAAP earnings of 96 cents, beating estimates by four cents per share. Looking ahead, the company’s FY 2021 forecasts calling for -2% to flat revenue growth and $2.94 to $3.00 per share earnings were roughly in-line with expectations.

The PEO and Insurance Solutions segment experienced an 8% decline thanks to the unemployment rate and a drop in worksite employees at client offices. Despite these challenges, client retention remained strong throughout the quarter and the company’s resilient business model has helped it weather COVID-19 relatively well thus far.

The company raised its quarterly dividend by 6.5% to $0.66 per share, which represents a 2.6% forward yield. The dividend is payable on May 27, 2021, to shareholders on record as of May 12, 2021.

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