We recently published a list of Retirement Stock Portfolio: 12 Safe Tech Stocks To Consider. In this article, we are going to take a look at where Automatic Data Processing, Inc. (NASDAQ:ADP) stands against other safe tech stocks in retirement portfolio.
In the past, retirees could rely on bonds to provide steady income, with 10-year Treasury yields around 6.50% in the late 1990s. However, current rates are significantly lower, resulting in a major impact over time. For instance, a $1 million investment in 10-year Treasuries now yields over $1 million less than it would have 20 years ago. Adding to this concern, today’s retirees are increasingly uncertain about the future of Social Security. According to a survey by investment manager Schroders, Americans with employer-provided retirement plans estimate they’ll need $1.2 million to retire comfortably. However, nearly half expect to have less than $500,000 saved. Another study by Transamerica Institute shows that only 1 in 5 middle-class individuals feel confident in their ability to retire or maintain a comfortable lifestyle during retirement. Many of these anxious pre-retirees plan to start Social Security benefits before age 67, even though waiting until at least age 70 would maximize their monthly payments for life. Overall, pre-retirement anxiety appears to be widespread.
That said, the retirement realm may not be as bleak as it appears at first. According to this year’s survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research, nearly 80% of retirees feel they can spend money as they wish, and an even higher percentage believe they are living the retirement lifestyle they envisioned. In addition to managing their current expenses, over half of retirees are still saving for the future. Key factors contributing to this success include planning—such as deciding when to claim Social Security, preparing for emergencies, estimating retirement duration, and periodically reviewing and rebalancing asset allocations to stay on track during market fluctuations.
Additionally, inflation slowed down to its weakest pace in over three years last month, as price increases continued to ease from their generational highs. With concerns about the rising cost of living playing a central role in the presidential election campaign, the Bureau of Labor Statistics released its final inflation report before voters head to the polls. The consumer price index rose 2.4% year-over-year in September, slightly above economists’ expectations of 2.3% but down from 2.5% in August. The “core” index, excluding volatile food and energy prices, climbed 3.3% annually. On a monthly basis, prices increased by 0.2%. Meanwhile, the broader U.S. economy remains strong, with employers adding 254,000 jobs in September, countering fears of a labor market slowdown.
That said, during economic challenges, investors—especially those focused on securing their retirement—often gravitate toward low-risk stocks that offer steady returns amidst uncertainty. Healthcare and consumer stocks are typically favored in such conditions, but tech stocks can also be a smart investment if chosen wisely. Tech stocks have consistently outperformed the broader market for several years and now make up over 30% of the market’s total holdings.
Our Methodology
For our list of the 12 best safe stocks for a retirement portfolio, we used stock screeners, ETFs, and online rankings to identify mega-cap tech stocks with low beta values, a track record of consistent dividend payments, and well-established businesses. These stocks were then ranked based on hedge fund sentiment, as reported in Insider Monkey’s Q2 2024 database.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
HR management team reviewing resumes on a computer.
Automatic Data Processing, Inc. (NASDAQ:ADP)
Beta Value: 0.80
Dividend Yield: 1.95%
Number of Hedge Fund Holders: 52
Automatic Data Processing, Inc. (NASDAQ:ADP) is a global technology company specializing in cloud-based human capital management (HCM) solutions. ADP offers a range of strategic platforms and HR outsourcing services to help organizations manage their workforce efficiently.
BofA Securities recently raised its price target for Automatic Data Processing, Inc. (NASDAQ:ADP) to $281, up from the previous $276, while maintaining a Neutral rating on the stock. This follows an earlier upgrade in January 2024, where the firm cited improvements in ADP’s Professional Employer Organization (PEO) segment and predicted that growth and margins would stabilize after the second fiscal quarter. The analyst noted that payroll stocks, including ADP, tend to underperform during the early stages of rising unemployment. However, ADP’s fourth fiscal quarter results were solid, with strong bookings enabling the company to hit the upper end of its projected 4-7% growth for FY 2024. Preliminary guidance for FY 2025 also aligns with market expectations.
Additionally, Automatic Data Processing, Inc. (NASDAQ:ADP) has introduced ADP Lyric HCM, a platform designed to offer flexible, intelligent, and personalized HR solutions on a global scale. The company also announced the pricing of $1 billion in 4.450% senior notes due in 2034 for general corporate purposes.
As a consistent dividend payer, Automatic Data Processing, Inc. (NASDAQ:ADP) is considered a safe tech stock for generating passive income, having increased its dividend for 49 consecutive years. By the end of Q2 2024, 52 hedge funds tracked by Insider Monkey held stakes in ADP, with a combined value exceeding $3.06 billion.
Overall, ADP ranks 5th on our list of safe tech stocks to consider in retirement portfolio. While we acknowledge the potential of ADP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.