(CTAS - Analyst Report
) recently raised its quarterly dividend by 10 cents to 64 cents per share. This marks the 30th consecutive dividend hike for the company and translates into a 19% increase from the prior dividend of 54 cents. The increased dividend will be paid on December 12, 2012, to stockholders of record as of November 9, 2012. Shares of Cintas inched up 0.4% to $42.35 on the break of this news.
The dividend hike comes almost after a year. On October 18, 2011, Cintas had upped its dividend by 10% to 54 cents per share. The company has consistently hiked its dividend each year since 1983, when it went public.
The dividend hike comes on the back of the company’s first quarter 2013 results. Cintas’ earnings per share were 60 cents, up 15% from 52 cents in the year-earlier period, outperforming the Zacks Consensus Estimate by a penny.
Cintas reported revenues of $1.05 billion in the quarter, missing the Zacks Consensus Estimate of $1.06 billion but improved 3.4% year over year. Organic growth in the quarter was 3.2%.
Cintas, in fiscal 2013, expects to generate revenues in the band of $4.25 billion to $4.35 billion and earnings in a range of $2.50 to $2.58 per share. The Zacks Consensus Estimate is pegged at $2.55 per share, closer to the higher end of the guidance.
Cintas continues to focus on strengthening its balance sheet and improving cash flow. The company’s debt-to-capital ratio was a manageable 37.8% as of August 31, 2012 flat compared with August 31, 2011. As of August 31, 2010, Cintas had $319 million in cash and cash equivalents on its balance sheet, twice the $150.3 million held on August 31, 2011.
The dividend hike, together with Cintas’ share buyback program, continued to enhance shareholder value. In the first quarter, Cintas purchased 1.8 million shares of its common stock at an aggregate price of $70.6 million. The company has $299.8 million available for share buyback program under its authorization as of August 31, 2012. It is expected that the share buyback program during the fourth quarter will benefit earnings by roughly 3 cents per share.
Cintas faces severe challenges from the soft European market. The document management segment was affected during the reported quarter due to lower recycled paper prices. If paper price remains low, it may weigh on margins going forward. Moreover, higher cotton price remain a headwind for the company in the coming quarters.
However, Cintas continues with its focus on selling profitable business and cost cutting initiatives, which bodes well for its future performance. Moreover, the company has a healthy balance sheet to finance future acquisitions.
Cincinnati, Ohio-based Cintas Corporation designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products, and first aid and safety products for approximately 900,000 businesses. The company retains a short-term Zacks #2 Rank (Buy).