Top Dividend Growth Stocks: #16 Unifirst

We are counting down the Top Dividend Growth Stocks. Coming in at #16 is Unifirst Corp (UNF). UniFirst designs and makes workplace uniforms and protective work wear clothing in the USA, Europe, and Canada. It also rents, cleans, delivers, and sells a range of uniforms and protective clothing.

UniFirst Corp (UNF) is ‘First Class,’ failing only 1 of 5 Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 36 years, making it a Dividend Aristocrat 25+. We consider UNF to be a Growth stock.

GROWTH:  UNF’s 5-year average dividend growth rate is 44.2%, wonderfully high versus the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 9.5% per year for the last 5 years versus the dividend universe at 8.3%, so UNF is slightly above the average.

INCOME: UNF’s current dividend yield is .44%, less than half of the average at 2.65%. 

SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. UNF has a DCR of 15.1 which is excellent, well above the minimum of 2. 

VALUATION: The price at time of analysis was $227.61, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $122.47. The S&P500’s average PE ratio is 38.42, versus UNF’s PE ratio of 33.48,  below the S&P 500 average PE, indicating some value, as compared to our dividend universe. Our ‘Value Rating’ for UniFirst Corp is 2 out of 5.0, meaning that  both PS and PE indicate the stock is moderately expensive, compared to other dividend stocks available. Growth stocks tend to be expensive to purchase.

TIMING: Historical Yield and PE tell us that UNF has ‘Medium ‘Buy’ Signal’ Don’t eliminate a stock based on one factor (or lack thereof). 

QUALITY: Our quality formula gives UNF a ‘Quality Rating’ of 3.9 (out of 5), versus the average of 2.7 for this month’s dividend universe.

Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate UniFirst Corp a ‘A-.’

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