At one point in its history, Cintas (CTAS +0.45%) adopted the slogan "The Uniform People." It has since branched out beyond uniforms and now uses the line "Ready for the Workday." Both of those advertising efforts convey what the company does for customers, but they probably don't elicit any excitement from an investor's point of view. Which is too bad, because this boring company is a dividend growth machine. Here's what you need to know.
A quick breakdown
Cintas has two main divisions. Its uniform and facility services (think things like door mats) operation brought in revenue of nearly $6.9 billion in fiscal 2023. Meanwhile, the first aid and safety services division produced revenue that was a little shy of $1 billion. These are sizable numbers, and support a company with a market cap of $52 billion.
Image source: Getty Images.
It is big, but the business is not sexy. It is not even all that interesting. Providing companies with uniforms and outfitting their safety kits will get them "ready for the workday," but it won't draw the attention of investors like an AI stock would. Cintas is an industrial giant that sits quietly in the background, just doing its thing.
That thing, however, is fairly regular and reliable growth. The path toward that end involves expanding the company's reach by selling to new clients and selling existing clients new products. The company also has a history of buying competitors, which opens up additional cross selling opportunities. Nuts and bolts business basics. And yet, revenue has doubled over the last decade, and earnings per share have increased over 300%!
CTAS Revenue (Annual) data by YCharts
This industrial company operates a boring business, but the results are anything but boring. They are, dare I say it, kind of exciting -- and management is proud of the fact (and rightly so) that it has grown revenue and profits in 52 of the last 54 years.
The dividend impact
The story gets even more interesting for dividend growth investors. For starters, Cintas has increased its annual dividend for 39 consecutive years. That is every year since the company held its initial public offering (IPO). Clearly, that's a record that dividend investors should be interested in.
But what's more notable than just the number of years involved is the rapid pace of dividend growth. The most recent increase was a huge 21%. With inflation raging, that number will help investors to keep up with rising costs, as it materially increases the buying power of Cintas' dividend.
NASDAQ: CTAS
Key Data Points
And that increase isn't unusual. Over the trailing 3-year period, annualized dividend growth was just shy of 20%. Over the past five years, the figure was 22.1%. And over the trailing 10-year period annualized dividend growth was roughly 22.2%. Year in and year out, Cintas is rewarding investors with massive dividend increases.
CTAS EPS Diluted (Annual) data by YCharts
Over the past decade, while earnings were increasing around 300% or so, dividends grew nearly 500%! If you are looking for dividend growth, Cintas is clearly worth a deep dive.
Not exactly cheap
To be fair, despite operating a boring background business, Cintas' success isn't a secret. The dividend yield is a fairly tiny 0.9% today. It was more than twice that during the Great Recession. Those with a value bias might not want to buy the stock today. But if dividend growth is something you look for, don't move on and forget about Cintas. Keep an eye on it, as the next deep drawdown could present you with the dividend growth buying opportunity you have been waiting for.
