The Zacks Outsourcing industry seeks to benefit from the increased adoption of cloud computing and other emerging technologies. Operational efficiency and reduced expenses on the back of a successful work-from-home trend and the hybrid working model have been driving competitive advantage besides increasing innovation and speed to market. The buoyancy in the industry is further confirmed by its Zacks Industry Rank #58, which places it in the top 23% of more than 250 Zacks industries.

However, rising data security issues, thanks to increased dependency on technology, are concerns for the industry.

Over the past three months, the industry has declined 6.2% against the S&P 500 Index’s 6.4% appreciation and 2.8% rise of the broader Zacks Business Services sector.

Image Source: Zacks Investment Research

Given this backdrop, let’s focus on some outsourcing stocks — Automatic Data Processing, Inc. (ADP Quick QuoteADP - Free Report) , Paychex, Inc. (PAYX Quick QuotePAYX - Free Report) and Broadridge Financial Solutions, Inc. (BR Quick QuoteBR - Free Report) — which have consistently announced dividend hikes, thus reflecting their pro-shareholder stance.

Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, they offer downside protection with their consistent increase in payouts.

Additionally, these companies have superior fundamentals like a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics.

How to Pick Stocks With Solid Dividend Payouts?

In order to choose some of the best dividend stocks from the aforementioned industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Each of the three stocks mentioned below carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Automatic Data Processing: Headquartered in Roseland, NJ, Automatic Data Processing provides cloud-based human capital management solutions worldwide. Currently, it has a market capitalization of $89.84 billion.

ADP pays out a quarterly dividend of $1.25 ($5.00 annualized) per share, which gives it a 2.31% yield at the current stock price. This company’s payout ratio is 66% of its earnings at present. The five-year dividend growth rate is 11.08%. (Check ADP’s dividend history here).

We are impressed by ADP’s endeavors to reward its shareholders. On Nov 9, 2022, ADP's board of directors approved a 20% dividend hike to $1.25 per share. This dividend hike reflects ADP’s 48^th year of consecutive annual dividend increases.  The company has a consistent track record of paying dividends to its shareholders. During the first half of fiscal 2023, ADP paid dividends worth $514.6 million. During fiscal 2022 and fiscal 2021, ADP paid dividends worth $429.6 million and $390.8 million, respectively.

Automatic Data Processing, Inc. Dividend Yield (TTM)

Automatic Data Processing, Inc. dividend-yield-ttm | Automatic Data Processing, Inc. Quote

Paychex: Headquartered in Rochester, NY, Paychex provides integrated human capital management solutions for human resources, payroll, benefits, and insurance services for small to medium-sized businesses in the United States, Europe, and India. Currently, it has a market capitalization of $40.14 billion.

Paychex pays out a quarterly dividend of 79 cents ($3.16 annualized) per share, which gives it a 2.84% yield at the current stock price. This company’s payout ratio is 77% of its earnings at present. The five-year dividend growth rate is 7.49%. (Check Paychex’s dividend history here).

We are impressed by Paychex’s endeavors to reward its shareholders. In April 2022, PAYX’s board of directors increased its quarterly cash dividend by 20% to 79 cents per share. The company has a consistent track record of paying dividends to its shareholders. During the first nine months of fiscal 2023, PAYX paid dividends worth $854.1 million, higher than $714.9 million paid during the first nine months of fiscal 2022. During fiscal 2022, 2021 and 2020, Paychex paid dividends worth $999.6 million, $908.7 million and $889.4 million, respectively.

Paychex, Inc. Dividend Yield (TTM)

Paychex, Inc. dividend-yield-ttm | Paychex, Inc. Quote

Broadridge: Headquartered in Lake Success, NY, Broadridge provides investor communications and technology-driven solutions for the financial services industry. Currently, it has a market capitalization of $17.09 billion.

Broadridge pays out a quarterly dividend of 72.5 cents ($2.90 annualized) per share, which gives it a 2.00% yield at the current stock price. This company’s payout ratio is 46% of its earnings at present. The five-year dividend growth rate is 11.36%. (Check Broadridge’s dividend history here).

We are impressed by Broadridge’s endeavors to reward its shareholders. On Aug 11, 2022, BR’s board of directors increased its quarterly cash dividend by 13.3% to 72.5 cents per share, thereby increasing the annual dividend amount from $2.56 to $2.90 per share. The company has a consistent track record of paying dividends to its shareholders. During the first half of fiscal 2023, BR paid dividends worth $160.3 million, higher than $141.2 million paid during the first half of fiscal 2022. During fiscal 2022, 2021 and 2020, Broadridge paid dividends worth $290.7 million, $261.7 million and $241 million, respectively.

Broadridge Financial Solutions, Inc. Dividend Yield (TTM)

Broadridge Financial Solutions, Inc. dividend-yield-ttm | Broadridge Financial Solutions, Inc. Quote

Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but also positively impact earnings per share.