ADP- Another Compounding Machine for Your Retirement Money

 Automatic Data Processing, Inc. (ADP) is a global provider of integrated computing and business outsourcing. ADP has nearly $9 billion in revenues and approximately 570,000 clients. ADP offers a range of HR, payroll, tax and benefits administration. ADP is one of the largest providers of business outsourcing solutions. This is an official description of ADP per Wikipedia. You may still not know what ADP is but if you check your paycheck, chances are ADP is the one which is managing your monthly or biweekly salary payment. I have worked in several big companies and all of them indeed use ADP for the paycheck management. It makes money in primarily 2 ways for this payroll service:
- It earns royalty on the money movement from employers' pockets into employees' paychecks, which involves withholding your taxes, submitting them to various government agencies, processing  paychecks, and paying employees. If you envision this money movement as a transportation in the global financial system, then ADP works as a toll road. 
- More amazingly, during this money movement course, ADP can also earn a substantial amount of money by simply holding your money overnight. As you can imagine, in order for ADP to process your paycheck on time, it must receive your gross salary in advance, maybe one or two days earlier than your payday. This temporary money hold in the ADP system is called "float", and actually ADP can earn interest on the float money. Given the sheer volume of the money ADP manages, the interests on float it earns become huge in hundreds of millions and actually it represents almost a quarter of its total pretax earnings. This is really a painless way of making money by using others' money to your full benefits. If the economy truly recovers, ADP will for sure manage more paycheck money and as a result, it will earn more interests on the float.

ADP  is by all means a dominating company in the payroll industry. It is one of a few elite companies with the AAA debt rating, the safest companies in the world such as  Berkshire Hathaway, ExxonMobil, Microsoft, and Johnson & Johnson. Parking your retirement money with ADP, you can definitely sleep well in the night. More importantly it has decades of the track record for paying dividends, which are also growing year after year. I truly consider ADP as a compounding machine, safe enough for my retirement money. At $53-$54, it is not really cheap. However, given its safety and long-term track record of dividends, I don't mind buying a few shares of ADP at the moment to start to compound and will really invest substantially more if its price drops well below $50. I don't know whether and when it will happen, but I will watch it actively and will act decisively when the day comes.