Last week was a good one for income investors, as the beginning of this year's final earnings season brought a raft of dividend raises from a variety of stocks.
There were too many increases to fit into one installment of this article series. So, as ever, I've picked three lifters I think particularly distinguish themselves -- Cintas (NASDAQ:CTAS), Carnival Cruise Lines (NYSE:CCL) (NYSE:CUK), and Visa (NYSE:V).
Out of this week's trio, business services veteran Cintas is the only Dividend Aristocrat -- i.e., one of the few publicly traded companies that has raised its regular dividend at least once annually for a minimum of 25 years in a row. Cintas is extending its streak to 34 years with a 22% hike in its annual distribution to $1.62 per share.
Cintas has been doing quite well lately. In its first quarter of fiscal 2018, net profit came in at $1.48 per share, 13% higher on a year-over-year basis. Revenue rose 27% to hit $1.61 billion. The company's core uniform-rental and facility-services business grew robustly, thanks in no small part to its recently consolidated acquisition of peer uniform company G&K Services.
Meanwhile, both operating and free cash flow have risen substantially. The latter more than doubled in fiscal 2017 to over $473 million, far more than enough to cover the $142 million in dividend payments for that year. The company is a solid and effective cash generator and it's now bulked up with the G&K consolidation. I wouldn't worry at all about Cintas maintaining its Dividend Aristocrat status.
The company's once-a-year dividend is to be handed out on Dec. 8 to stockholders of record as of Nov. 10. The payout ratio on it is a very modest 27%, while the yield would be 1.1%. By comparison, the average yield of dividend-paying stocks on the S&P 500 is 1.9%.
Carnival Cruise Lines
Carnival Cruise Lines just declared its second hike of the year, boosting its quarterly payout by 13% to $0.45 per share. As usual, the same rate will be paid in U.S. dollars to holders of the company's common stock (ticker symbol CCL) and its American depositary shares (CUK).
Although the company's current-quarter results are sure to be affected by the recent storms and devastation in the Caribbean, fundamentals are very much on the rise. Carnival posted an 8% year-over-year improvement in its top line for Q3 -- the highest quarterly revenue growth rate in six years -- to $5.5 billion. Adjusted net profit leaped to $2.29 per share from the year-ago quarter's $1.92.
Higher ticket prices fueled much of the growth, aided by the company's seemingly endless rollout of new features and services for its passengers.
Q3's free cash flow came in at just over $1 billion, nearly topping the company's all-time quarterly record. On a trailing-12-month basis FCF approached $2.4 billion, more than enough to cover the period's dividend payouts and share buybacks. This is a company in fine shape; I'd expect more dividend raises in the very near future.
Carnival's upcoming distribution will be paid on Dec. 15 to investors of record as of Nov. 24. It would yield 2.7% on both of the company's U.S.-listed stocks. The payout ratio comes in just under 20% on Q3 adjusted net profit.
Another chunky raise came from Visa, which lifted its quarterly dividend by 18%. The payment-card giant will begin paying its shareholders nearly $0.20 per share.
Visa is, and will almost certainly continue to be, a top player in credit and debit card transactions, and it's catching up fast in the digital segment. Last year it sewed up its acquisition of peer Visa Europe, and it's signed several agreements with top players in new payments modes. This has helped the company deliver several very strong quarters of better-than-expected revenue and profitability growth.
The company will report Q4 earnings on Oct. 25, and on average, analysts are expecting 10% growth on the top line and 15% for net profit. Visa has been handily topping estimates lately, so a significant beat wouldn't be a big surprise.
Since Visa is quite frugal with its dividend, it tends to spend much of (or even more than) its FCF on share buybacks. I've argued previously that this isn't an encouraging strategy; for investors it would be much better to get a little more coin with a higher dividend. Regardless, Visa is a cash-generating machine and should remain so, thus I'd rate the new payout as more than sustainable.
Visa's next dividend is to be dispensed on Dec. 5 to shareholders of record as of Nov. 17. It yields a theoretical 0.7%. The payout ratio on the company's Q3 profit is a low 23%.
Watch for more dividend boosters
The coming weeks should bring even more dividend increases. Keeping your eye on them can give you some good investing ideas for your portfolio.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Visa. The Motley Fool recommends Carnival and Cintas. The Motley Fool has a disclosure policy.