1 Magnificent Dividend Stock Down 35% to Buy and Hold Forever

By Thomas Niel – Feb 26, 2026 at 9:15PM ESTKey PointsConcerns about a sluggish labor market and the disruption from artificial intelligence keep weighing on ADP shares.Despite the uncertainty, ADP continues to experience steady revenue, earnings, and dividend growth.At current prices, shares trade at a valuation that could prove to be a steal.NASDAQ: ADPAutomatic Data ProcessingMarket Cap$86BToday's Changeangle-down(1.86%) $3.98Current Price$218.23Price as of February 26, 2026 at 3:58 PM ETThis Dividend King may not stay out of favor for long.Over the past year, a double whammy of headwinds has hit Automatic Data Processing (ADP +1.86%), better known as ADP. First, concerns about the sluggish employment market have continued to pressure the payroll processor and HR software provider's shares. More recently, ADP has sold off due to fears that generative artificial intelligence (AI) will hurt the business. Much as with enterprise software stocks, investors are worried that mass adoption of AI will bode poorly for ADP's business model. Add in additional concerns, and it's easy to see why shares are down by more than 35% from their 52-week high. ExpandNASDAQ: ADPAutomatic Data ProcessingToday's Change(1.86%) $3.98Current Price$218.23Key Data PointsMarket Cap$86BDay's Range$215.13 - $221.7052wk Range$203.26 - $329.93Volume203KAvg Vol2.9MGross Margin50.43%Dividend Yield2.95% Yet while there may be substance to all this fear and uncertainty, it's possible that investors have overreacted, creating an interesting buying opportunity with this blue chip dividend stock. Image source: Getty Images. From concern to overreaction It's not out of line for ADP investors to worry about sluggish growth and/or the impact of mass AI adoption on this company's fiscal performance going forward. Well over 60% of ADP's revenue still comes from its bread-and-butter payroll processing business, so nationwide employee numbers do directly affect how well this segment performs. These same risks could arguably affect ADP's cloud-based human resources management and professional employer organization services business as well. However, these market fears are in stark contrast to forecasts. Last July, when ADP first released guidance for the fiscal year ending June 30, 2025, its forecast of 5% to 6% revenue growth fell slightly short of expectations. However, management recently upped its full-year forecast and now anticipates sales growth to come in near the top end of its initial forecast. Analysts have, in turn, upped their own forecasts, anticipating revenue growth of 6.02% this fiscal year. As for earnings growth, management believes adjusted EPS will rise 8% to 10% this year, in large part due to rising margins with its non-payroll business lines. Sell-side forecasts call for earnings growth of around 9.5%, in line with management's outlook. The long-term silver lining with ADP Looking ahead to the next fiscal year, analyst forecasts call for growth in line with this year's projections. For the fiscal year ending June 30, 2027, analysts anticipate 5.7% sales growth and 9% earnings growth. Alongside factors like improved margins in ADP's non-payroll business, the company's $6 billion share repurchase plan stands to provide a further earnings growth boost. The prospect of steady growth bodes well for ADP investors in two ways. First, consistent growth suggests ADP will stay one of the Dividend Kings, which are dividend stocks that have at least 50 consecutive years of dividend growth; ADP has increased its dividend 51 years in a row. The latest dividend increase, 10.3%, was last November. Over the past decade, ADP's dividend growth has averaged around 12.2%. Currently, the stock has a forward dividend yield of 3.3%. Alongside this steady return, shares could experience even greater price appreciation once these worries subside. Following the pullback, ADP trades for less than 20 times estimated FY2026 earnings. Historically, the stock has traded for around 25 times forward earnings. Add it up, and it's easy to see how long-term investors could profit from ADP's short-term volatility.Read NextFeb 18, 2026 •By James BrumleyWant Decades of Passive Income? 3 Stocks to Buy Now and Hold Forever.Jan 21, 2026 •By James BrumleyIgnore the S&P 500: These 3 Kings Could Mint Thousands of MillionairesJan 4, 2026 •By Daniel SparksOnce a Market Darling, This Software-as-a-Service Stock Has Been Crushed. Time to Buy?Dec 17, 2025 •By Daniel SparksThe New Tech Dividend King Poised for Explosive GrowthDec 16, 2025 •By Motley Fool YouTubeADP: A Strong Contender in the Competitive Payroll Processing MarketApr 30, 2025 •By Motley Fool Markets TeamADP Exceeds Earnings Forecasts in Q3About the AuthorThomas Niel is a contributing Analyst at The Motley Fool, covering publicly traded companies in the consumer goods and technology sectors. Prior to the Motley Fool, Thomas was a contributing Analyst for several online investing publications, including InvestorPlace, Seeking Alpha, and TipRanks. He also has past career experience in the accounting and government contracting industries. He holds a B.B.A. in Accounting from Marymount University. Thomas won his school's geography bee in the fifth grade, but retired from the professional geography bee circuit shortly thereafter.TMFThomasNielStocks MentionedAutomatic Data ProcessingNASDAQ: ADP$218.23 (+1.86%) $+3.98*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.