Paychex Pays 3.65% and Added $4.2 Billion in Debt but the Dividend Looks Safe

2 hours ago 5

William Temple

Thu, December 11, 2025 astatine 9:01 AM CST 4 min read

An infographic titled 'Dividend Safety: Paychex After Paycor Acquisition' connected a acheronian bluish inheritance with abstract tech lines. The representation presents Paychex's fiscal wellness post-acquisition, featuring sections for Payout Ratios & Coverage (Earnings Payout Ratio 92.4% - Elevated, FCF Payout Ratio 82.4% - Healthy, Operating Cash Flow Coverage 1.35x - Adequate), Dividend Highlights (Quarterly Dividend $1.08 / Share, Annual Dividend $4.32 / Share, Dividend Yield 3.65%, 14 Consecutive Annual Increases), and Debt Impact & Outlook (Total Debt $5.02B - 5x Increase, Cash connected Hand $1.63B - Solid Buffer, Debt-to-Equity 1.22 - Moderate). The wide dividend information standing is 'SAFE' with a enactment that maturation whitethorn mean until leverage normalizes.

Paychex took connected $4.2B successful caller indebtedness to get Paycor. This pushed debt-to-equity from 0.23 to 1.22.
The net payout ratio stands astatine 92.4% with small country for mistake if net decline.
Management expects $90M successful outgo synergies from Paycor successful fiscal 2026 to assistance work indebtedness and support the dividend.
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Paychex (Nasdaq: PAYX) pays a quarterly dividend of $1.08 per share, yielding 3.65%. The institution has raised its dividend for 14 consecutive years, with the astir caller 10.2% summation successful February 2025. The question for income investors: tin Paychex prolong this dividend aft taking connected $4.2 cardinal successful caller indebtedness to get Paycor?

Metric

Value

Annual Dividend	$4.32 per share
Dividend Yield	3.65%
Consecutive Years of Increases	14 years
Most Recent Increase	10.2% (Feb 2025)
5-Year Dividend CAGR	12.4%

Paychex generated $1.95 cardinal successful operating currency travel during fiscal 2025 against superior expenditures of $192 million, producing escaped currency travel of $1.76 billion. The institution paid $1.45 cardinal successful dividends, resulting successful a escaped currency travel payout ratio of 82.4%. That leaves $310 cardinal successful cushion.

The net payout ratio tells a tighter story. With diluted EPS of $4.46 and dividends of $4.12 per stock paid successful fiscal 2025, the net payout ratio stands astatine 92.4%. That is elevated, leaving small country for mistake if net decline.

Metric

FY2025 Value

Assessment

Earnings Payout Ratio	92.4%	Elevated
FCF Payout Ratio	82.4%	Healthy
Operating Cash Flow Coverage	1.35x	Adequate

The FCF payout ratio has crept up from 72.8% successful fiscal 2022 to 82.4% today, reflecting some dividend maturation and Paycor integration costs. Still, the institution generates capable currency to screen the dividend with borderline to spare.

Paychex carried $866 cardinal successful full indebtedness earlier acquiring Paycor. That fig jumped to $5.02 cardinal by May 2025. Debt-to-equity surged from 0.23 to 1.22. This is the biggest hazard to the dividend.

Metric

Value

Assessment

Total Debt	$5.02B	Elevated
Debt-to-Equity	1.22	Moderate
Cash connected Hand	$1.63B	Solid Buffer

CFO Bob Schrader addressed the indebtedness load connected the July 2025 net call: "We expect to negociate leverage efficaciously [...] owed to 2 main factors. First, the further EBITDA generated from this transaction done synergies. Second [...] determination is immoderate semipermanent indebtedness maturing wrong the adjacent 12 months that we program to wage down."