CTAS Cintas Corporation

Cintas Corporation (CTAS) upped its quarterly dividend by 5 cents to 54 cents. This marks the 29th consecutive year of the company’s dividend hike and translates into a 10.2% increase from the prior dividend of 49 cents. The increased dividend will be paid on December 14, 2010, to stockholders of record as on November 11, 2010.

The dividend hike comes almost after a year. On October 26, 2010, Cintas had upped its dividend by 2% to 49 cents per share. The company has religiously hiked its dividend each year starting from 1983, the year it went public.  

Cintas’ Board of Directors also approved a new share repurchase program under which the company may repurchase up to $500 million of Cintas common stock at market prices. The number of shares to be repurchased and the timing will be determined by the Board.

Cintas has completed its previously authorized share buyback program in July 2011. Since the beginning of fiscal 2011, the company has purchased 23.4 million shares under its share buyback programs at a total cost of $702 million.

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, 2011, compared with 24.2% as of August 31, 2010.

As of August 31, 2010, Cintas had $150.3 million of cash and cash equivalents on its balance sheet. Cash flow from operations was $56.6 million in the fiscal first quarter 2012, up sharply 60% year over year.

The company’s performance in the fiscal first quarter 2012 was impressive. Cintas’ earnings per share were 52 cents compared with 40 cents in the year-earlier period, outperforming the Zacks Consensus Estimate of 47 cents.

Cintas recorded revenues of $1.02 billion in the quarter beating the Zacks Consensus Estimate of $0.998 billion. Revenues improved 10.1% year over year. The quarter marked the second straight period of double-digit revenue growth.

Cintas, in fiscal 2012, expects to generate revenue in the band of $4.0 billion to $4.1 billion and guides earnings in a range of $1.97 to $2.05 per share. The Zacks Consensus Estimate is pegged at $2.04 per share, nearer the high end of the guidance.

We retain our Outperform rating on Cintas Corporation. The quantitative Zacks #2 Rank (short-term Buy rating) for the company indicates upward pressure on the stock over the near term.

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. Cintas competes with G&K Services Inc. (GKSR) and privately held Alsco Inc. and ARAMARK Corporation.

 
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