Key Takeaways
📈 Insperity offers a 3.38% dividend yield with 13 consecutive years of dividend growth, though a high payout ratio of 142% raises questions about long-term sustainability.
💵 Cash flow remains tight, with just $8.25 million in levered free cash flow over the past year, making it challenging to fully cover dividend payouts from internal funds.
📊 Analyst sentiment has turned cautious, with recent downgrades and a consensus Hold rating; the average price target stands at $89.67, suggesting modest upside potential.
Updated 5/16/25
Insperity, Inc. delivers human resources and business performance solutions to small and mid-sized businesses across the U.S., operating under a co-employment model that allows clients to outsource many employer responsibilities. With a 13-year track record of dividend growth and a current yield of 3.38%, it’s a company that continues to appeal to income-focused investors, even in the face of recent earnings pressure.
Over the past year, the stock has faced headwinds, falling more than 30% as rising healthcare costs and economic uncertainty weighed on margins and earnings. Still, with strong client retention, steady revenue growth, and a seasoned management team, Insperity is actively positioning itself for long-term resilience through strategic partnerships and consistent shareholder returns.
Recent Events
Insperity has had a rough run lately. Over the past year, the stock has dropped nearly 32%, which stands in sharp contrast to the broader market’s positive momentum. The S&P 500, for comparison, gained over 11% in that same window. So what’s going on under the hood?
It boils down to a mix of slower earnings, higher expenses, and market skepticism. For a company that specializes in helping small and mid-sized businesses streamline their human resources, these economic headwinds aren’t ideal. Over the trailing twelve months, Insperity’s net income came in at $63 million. Earnings per share dropped to $1.69, reflecting a steep 35% decline compared to a year ago. Margins are tight too. Operating margin sits at 3.65%, and net profit margin is down to just 0.95%.
But not everything is bleak. Revenue grew 3.4% year-over-year, reaching $6.64 billion. And Insperity has a solid cash cushion of $568 million, although its debt load—$436 million—is high enough to make anyone double-check the math. The debt-to-equity ratio is way up at 366%, which raises a few eyebrows, especially with income levels dipping.
For a company that built its reputation on making other businesses more efficient, the market is clearly waiting to see if it can bring that same efficiency back to its own operations.
Key Dividend Metrics
📈 Forward Dividend Yield: 3.38%
💸 Forward Annual Dividend: $2.40 per share
📅 Most Recent Dividend Date: March 27, 2025
🪙 Ex-Dividend Date: March 13, 2025
📊 Payout Ratio: 142%
📉 5-Year Average Yield: 2.04%
🧾 Dividend Growth Streak: 13 years
📦 Last Stock Split: 2-for-1 on December 19, 2017
Dividend Overview
Right now, dividend investors have a reason to be interested. That 3.38% forward yield stands out—especially since it’s noticeably higher than the company’s five-year average. But it also begs the question: is this a signal of value or a warning sign?
The payout ratio is where things get tricky. At 142%, Insperity is currently distributing more in dividends than it earns. That’s not a deal-breaker by itself, but it’s a number that needs to be watched closely. When companies consistently outspend their earnings on dividends, it usually means they’re either extremely confident in a near-term rebound or they’re stretching to maintain appearances.
Despite the tight margin and slowing earnings, Insperity hasn’t wavered in its dividend policy. Management has kept the payout steady, which suggests they still see stability in future cash flows. But if profits don’t bounce back soon, sustaining this payout could become a real balancing act.
Dividend Growth and Safety
One thing you can say for sure: Insperity has built a solid dividend track record. Thirteen straight years of growth doesn’t happen by accident. That kind of consistency signals a clear commitment to rewarding shareholders and signals confidence from leadership in the long-term business outlook.
But the current numbers paint a more cautious picture. Free cash flow is tight—just $8.25 million in levered free cash flow over the past year, compared to the roughly $90 million needed to cover dividends. That’s not a lot of breathing room. Operating cash flow has also narrowed to $46 million. These are slim buffers for a company with this kind of payout.
Another angle worth noting: short interest. More than 11% of the float is sold short, with a short ratio of nearly 6. That suggests some investors are betting on more downside or possibly even a dividend cut. It’s not conclusive, but it adds to the overall sense of caution.
That said, Insperity has weathered economic cycles before. It operates in a recurring revenue model, which tends to offer stability even in uncertain times. If earnings rebound—and the company brings expenses under control—the current dividend situation could look a lot less precarious in hindsight.
Today, the dividend is still standing tall. The yield is generous, the growth record is strong, and management seems determined to maintain that streak. But there’s no denying the math is getting tighter. For dividend investors, that makes Insperity a name worth watching very closely.
Analyst Ratings
📉 Insperity has recently seen a shift in analyst sentiment, with a series of downgrades reflecting concerns over its financial performance. 🧾 Truist Financial lowered its price target from $82 to $70 while maintaining a Hold rating, citing weaker-than-expected earnings and a cautious outlook. Similarly, another downgrade came as StockNews.com adjusted its stance from Buy to Hold, aligning with a more cautious tone from the market. 🔍
📊 The consensus among analysts is currently a Hold, with a consensus price target of $89.67. 📌 This suggests some potential upside from the current price, but also reflects uncertainty around the company’s near-term execution. It’s not a bearish call, but it does signal that enthusiasm has cooled for now.
💼 These changes are tied to Insperity’s recent earnings report, which showed compressed margins and a notable dip in year-over-year earnings. 🧮 Analysts appear to be concerned about the sustainability of its current dividend levels, as well as the impact of rising costs on profitability.
📉 With the stock down significantly over the past year and valuation multiples under pressure, the rating adjustments aren’t surprising. 🔔 Still, analysts haven’t turned negative overall—they’re signaling a wait-and-see approach rather than a full pullback. 👀 Investors paying attention to these signals will want to keep an eye on the next couple of quarters for any signs of turnaround or additional headwinds.
Earnings Report Summary
Slower Earnings, Higher Costs
Insperity’s first quarter of 2025 was a bit of a reality check. Revenue ticked up modestly by about 3% year-over-year, landing at $1.9 billion. That growth was mostly thanks to a small boost in the number of paid worksite employees, which averaged around 306,000 during the quarter. But while the top line looked fine, the bottom line told a different story.
Net income came in at $51 million, which was a sharp drop—down about 35% compared to the same period last year. Adjusted earnings per share also fell, landing at $1.57, which missed Wall Street’s expectations. The big issue here? Healthcare costs. They came in higher than the company expected, dragging gross profit down by 10% to $310 million. That included more expensive inpatient and outpatient care, higher pharmacy spending, and a rise in large insurance claims. All in, it put a noticeable dent in the quarter.
Strategic Moves Still in Motion
Operating expenses rose slightly to $242 million, which wasn’t surprising. Insperity has been steadily investing in areas they believe will pay off down the road. One of the bigger initiatives is their partnership with Workday, a move aimed at strengthening their offerings to mid-sized businesses. Leadership still sees this as a long-term growth engine, though they’ve made it clear that the real impact from that collaboration won’t be seen until sometime in 2026.
One bright spot was client retention. The company held onto 91% of its clients during the quarter, up from 88% the year before. That kind of stability is no small feat when macroeconomic conditions are this uncertain.
And despite the earnings dip, Insperity stayed committed to returning capital to shareholders. They bought back shares and paid out dividends, totaling $42 million returned during the quarter.
What’s Ahead
Looking forward, the guidance for Q2 and the full year was a little more reserved than some investors might have hoped. For the second quarter, Insperity expects adjusted earnings per share somewhere between $0.29 and $0.67. Adjusted EBITDA is forecasted to land between $33 million and $53 million. For the full year, they’re projecting EPS to range from $2.23 to $3.28 and adjusted EBITDA between $190 million and $245 million.
CEO Paul Sarvadi acknowledged the hit this quarter took from healthcare costs but reiterated the company’s focus on the long game. He mentioned that while the current environment is tough, he’s confident in the strategy Insperity is rolling out, particularly the tech-driven initiatives that should start to move the needle in the coming quarters.
All things considered, Insperity is in a bit of a holding pattern. They’re working through some short-term pain but still laying groundwork for what they hope is stronger growth ahead.
Management Team
Insperity’s leadership is anchored by a seasoned team with deep roots in the company and the HR outsourcing industry. At the helm is Paul J. Sarvadi, co-founder and CEO, who has been guiding the company since its inception in 1986. His long tenure provides continuity and a clear vision for the company’s strategic direction.
Supporting him is A. Steve Arizpe, President and Chief Operating Officer, who joined Insperity in 1989. Arizpe oversees key operational areas, including sales, marketing, human resources, client services, and information technology, ensuring the company’s services align with client needs and market demands.
James D. Allison serves as Executive Vice President, Finance; Chief Financial Officer; and Treasurer. His role encompasses financial strategy and oversight, critical for maintaining the company’s fiscal health.
Kathy Johnson, Executive Vice President of Strategic Development, focuses on long-term growth initiatives and the execution of the company’s strategic plans. Her responsibilities include enterprise analytics and corporate communications, areas vital for data-driven decision-making and stakeholder engagement.
The broader executive team includes leaders like Christian P. Callens, Senior Vice President, Legal; General Counsel, Secretary; and JaNette Connell, Senior Vice President, Corporate Human Resources, among others. This diverse group brings a wealth of experience and expertise, fostering a culture of servant leadership and high standards that permeate the organization.
Valuation and Stock Performance
Insperity’s stock has experienced significant volatility over the past year. The share price has declined by approximately 33 percent, reflecting investor concerns over rising healthcare costs and their impact on the company’s profitability. Despite this downturn, the company’s fundamentals remain solid, with a market capitalization of around 2.67 billion dollars.
The company’s price-to-earnings ratio stands at 24.15, suggesting that the stock is trading at a premium compared to some peers. However, this valuation may be justified by Insperity’s consistent revenue growth and strong client retention rates. The company’s beta of 0.56 indicates lower volatility compared to the broader market, which may appeal to risk-averse investors.
Insperity’s dividend yield is currently 3.44 percent, with an annual dividend of 2.40 dollars per share. The payout ratio is high at 145.71 percent, which could raise concerns about the sustainability of the dividend if earnings do not improve. Nonetheless, the company’s commitment to returning value to shareholders is evident in its consistent dividend payments and share repurchase programs.
Risks and Considerations
Investing in Insperity involves several risks that potential investors should consider.
Healthcare Cost Volatility: One of the primary challenges facing Insperity is the unpredictability of healthcare costs. Unexpected increases in medical claims can significantly impact the company’s margins, as seen in recent quarters.
Economic Sensitivity: As a provider of HR services to small and medium-sized businesses, Insperity’s performance is closely tied to the health of the broader economy. Economic downturns can lead to client attrition and reduced demand for services.
Regulatory Compliance: The HR outsourcing industry is subject to a complex web of federal and state regulations. Non-compliance or changes in legislation could increase operational costs or limit service offerings.
Competitive Landscape: The market for HR outsourcing is competitive, with numerous players offering similar services. Insperity must continuously innovate and maintain high service standards to retain and attract clients.
Dividend Sustainability: The high payout ratio raises questions about the long-term sustainability of the dividend, especially if earnings do not rebound as anticipated.
Final Thoughts
Insperity stands as a robust player in the HR outsourcing space, backed by a seasoned management team and a strong client base. While recent financial results have been impacted by rising healthcare costs and economic uncertainties, the company’s strategic initiatives and operational strengths position it well for future growth.
Investors should weigh the company’s solid fundamentals and commitment to shareholder returns against the risks associated with healthcare cost volatility and economic sensitivity. As with any investment, a thorough analysis aligned with individual financial goals and risk tolerance is essential.