1 Magnificent S&P 500 Dividend Stock Down 36% to Buy and Hold Forever

Does your portfolio need to produce more income? If so, here's some good news: There are plenty of fantastic dividend stocks trading at a nice discount right now.

In fact, one "forever" dividend-paying member of the S&P 500 is currently down 36% just since the middle of last year. That stock is Automatic Data Processing (NASDAQ: ADP).

Here's a closer look at the dividend stock and why it is a great buy-and-hold-forever candidate.

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The market's overestimating ADP's vulnerability

You may be more familiar with the company than you realize. It's better known as just ADP, which is one of the nation's biggest payroll processors. After 75 years in the business, in fact, one out of every six workers in the United States gets their paycheck from Automatic Data Processing.

But why is the stock down by more than one-third of its value in less than a year? It's due to a combination of factors: a weakening jobs market, disappointing revenue growth guidance, and a handful of analyst downgrades.

Mostly though -- as is the case with so many other industries right now -- investors are concerned that artificial intelligence (AI) will eventually negate the need for Automatic Data Processing's service. And to some degree, perhaps it will.

The scope of the damage this presumption has done to ADP shares, however, has been far greater than deserved for a couple of reasons.

First, while AI has the potential to disrupt the payroll-processing business, ADP isn't just a payroll processor. Benefits administration, employee recruiting, compliance and recordkeeping, payroll taxes, and even time and attendance are just some of the HR capabilities in its wheelhouse regularly relied on by over 1 million customers.

These are duties that could be theoretically delegated to an AI-powered solution. These are also functions, however, with little to no room for the error that an artificial intelligence platform will eventually make, which could be incredibly difficult to fix (particularly if it's not clear why the AI made the mistake in the first place).

Said in simpler terms, neither employees nor employers want to risk preventable mistakes being made with paychecks.

As for the second reason, worries that artificial intelligence tech is a threat to this company's business are overblown; ADP isn't trying to outperform AI. It's embracing it. It's just doing so in a way that makes sense for its particular purpose, offering tools that give employers greater insights about how their organization is functioning, offering automated chats to answer workers' job-related questions, or even predicting future personnel needs.

At this price, ADP stock offers far more reward than risk

None of this is to suggest ADP or its shareholders should simply ignore the prospect of new competition in the human resources technological toolkit space; the threat is real, to be sure.

That threat doesn't justify the amount of ground this ticker has lost over the course of just the past several months, however.

Income-seeking investors can certainly capitalize on this unmerited weakness. This stock's big pullback has pumped its forward-looking dividend yield to an above-average yield of just over 3.2%, which is based on a dividend, by the way, that's now been raised annually for 51 consecutive years, making the company a Dividend King, or a company that has raised its payout for at least 50 years. The company is on a strong enough financial footing that this incredibly impressive streak isn't apt to be disrupted anytime soon.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.