Elite Stocks

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Cintas - >>> 1 Current and 1 Future Dividend Aristocrat to Buy and Hold Forever


Motley Fool

By Josh Kohn-Lindquist

Apr 2, 2022


https://www.fool.com/investing/2022/04/02/1-current-and-1-future-dividend-aristocrat-to-buy/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Nike's digital transformation is just beginning, and its brand is stronger than ever.

Cintas continues to post strong sales growth regardless of the economic climate.

Excellent return on invested capital metrics mean these two may outperform.

These apparel-focused stocks look to continue their decades-long histories of beating the market.

While most apparel stocks make for better buy-low and sell-high candidates than genuine buy-and-hold investments, two businesses stand out as the exception: Nike (NKE 2.10%) and Cintas (CTAS -0.32%).

Despite operating in wildly different segments of the broader clothing industry, the two behemoths have smashed the S&P 500 index's returns over the last three decades.

So what exactly makes these two stocks different than the rest of their apparel peers?

Let's take a look.

Cintas

While calling Cintas a genuine apparel company is a bit of a stretch, it is home to a uniform rental service that makes up the most significant portion of its sales. Helping more than 1 million businesses get "ready for the workday," Cintas offers everything from these uniforms to COVID-19 test kits, restroom supplies, fire extinguishers, and personal protective equipment.

Despite seeming like an unexciting operation, Cintas has posted stock returns that are anything but -- rising 1,000% in just the last decade.

Perhaps most incredibly, Cintas not only survived the onset of COVID-19 -- it thrived in it.

From 2019 to 2021, earnings per share (EPS) and free cash flow steadily increased despite lockdowns that hampered the broader economy.

This fact is important to investors today, with inflation rising to 7% in the United States and forcing us to consider just how recession-proof our favorite holdings may be.

Heading into its third-quarter earnings report, Cintas faced myriad worries: inflation, escalating political tension, rising fuel prices, labor shortages, and a travel and hospitality industry that has not yet returned to full strength. However, the company went on to post 10% and 14% revenue and EPS growth, respectively, for the quarter -- showing that even with two of its main verticals -- travel and hospitality -- still struggling, it could be counted on for growth.

Furthermore, like Nike, Cintas owns a strong and growing ROIC, which clocked in at 20% as of its most recent quarter.

Thanks to this growing ROIC, the recession-proof nature of its operations, and its history as a Dividend Aristocrat, Cintas looks to be an excellent option to consider holding for the long term.

While the soon-to-be (Nike) and current (Cintas) Dividend Aristocrats pay 0.9% dividends, Cintas holds a more robust dividend growth rate of 22% annually over the last five years despite having already bumped its dividend for 38 years straight.

Ultimately, both businesses have a maximum dividend potential of nearly 3%, highlighting their promising combination of a reasonable dividend yield and a low payout ratio. So whether it is Nike's brand power or Cintas' ability to weather any economic storm, these are two great dividend growers to consider in today's volatile times.

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