Cintas Corporation (CTAS): A Magnificent Dividend Growth Stock to Buy Now

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We recently compiled a list of the 8 Magnificent Dividend Growth Stocks to Buy Now. In this article, we are going to take a look at where Cintas Corporation (NASDAQ:CTAS) stands against the other magnificent dividend growth stocks.

This year, dividend stocks have underperformed compared to the broader market, largely because tech stocks have captured most of the attention. The Dividend Aristocrats Index, which tracks companies with at least 25 consecutive years of dividend growth, has risen by nearly 10% year-to-date, compared to the broader market’s almost 24% gain. Despite this, dividend stocks remain a reliable choice for investors, consistently delivering returns to shareholders regardless of market conditions.

Investors tend to favor companies with strong histories of dividend growth. This preference stems from the fact that such stocks have reported solid long-term returns, often outperforming the broader market. According to a report by RMB Capital, dividend growers and initiators delivered an annual average return of 9.62% from 1972 to 2018, compared with a 2.40% return of the companies that did not pay dividends. Moreover, the broader market returned 7.30% during this period, underperforming dividend growers. The report further mentioned that companies with a track record of increasing dividends have demonstrated their ability to not only maintain but also grow payouts, even during market downturns. From a portfolio management standpoint, dividend growth portfolios offer good diversification, as companies with consistent dividend growth are typically spread across various industries. This provides an edge over portfolios that prioritize high dividend yields, which are often concentrated in mature sectors such as utilities and, before 2007, financials.

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Analysts suggest including dividend stocks in income portfolios. This recommendation is bolstered by the fact that several leading tech companies introduced dividend policies this year and are likely to sustain dividend growth over time, supported by their strong cash flows. David Harrell, editor of Morningstar’s DividendInvestor newsletter, shared his insights on dividend growth during a recent interview with the firm. Here are some comments from the analyst:

“You see headlines about dividend increases. That’s generally viewed as positive. There’s this whole idea of dividend growth investing by identifying companies that are growing their dividends at a regular pace. That’s indicative of companies with strong growing earnings. That’s considered positive. There’s also this idea that dividend stocks can be defensive in recessionary periods.”

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