Informed Dividend Investor – Third Quarter 2026

DAC STRATEGY

The DAC Equity Strategy is a diversified portfolio focused on investing in high-quality companies with a proven record of dividend growth. The strategy is driven by DAC’s proprietary “3D – Double Digits for a Decade or More™” investment discipline, which seeks to invest in companies that have increased their dividends by an average of at least 10% annually for 10 or more consecutive years.

This differentiated approach identifies leading domestic and international businesses characterized by consistent earnings growth, strong and sustainable free cash flow, conservative balance sheets, and a demonstrated commitment to rewarding shareholders through rising dividends.

The strategy is designed for investors seeking attractive longterm, risk-adjusted returns while benefiting from a growing stream of income. By focusing on companies that consistently increase dividends, the DAC Equity Strategy aims to deliver a combination of capital appreciation, downside resilience, and increasing cash flow over time.

IMPORTANCE OF DIVIDEND GROWTH

• Dividend-growing stocks have outperformed over time.
• Since 1926, dividends have accounted for approximately onethird of the total return of the stock market, while capital appreciation contributed two-thirds.
• Dividend yield, as a component of total return, is historically less volatile than price appreciation. “Good companies pay dividends. Great companies grow dividends.” (C. Troy Shaver, Jr.)

THE SIGNAL IN THE RAISE

Last quarter, we outlined five ways that companies can choose to deploy their cash flow: (1) reinvest organically in the business, (2) pursue acquisitions, (3) repay debt, (4) repurchase shares, and (5) pay dividends.

This quarter, we will expand on why the last (but certainly not least!) of these ways is important to maintaining our dividend-growth philosophy. The first two options—organic reinvestment and acquisitions—support enterprise growth. Continued investment in existing operations is essential to maintaining a company’s competitiveness and long-term sustainability, while acquisitions can provide an additional avenue for future expansion. History shows that the best companies are able to balance these organic and inorganic strategies most effectively. A third option is debt repayment, which reduces interest expense and can be important during times like now with higher rates. If not offset with other borrowings, it can lead to increased earnings per share (EPS). Similarly, share repurchases can also increase EPS by reducing the number of shares outstanding—the number in the denominator in the EPS calculation.

Finally, there are dividends, which are cash distributions authorized by a company’s Board paid directly to shareholders. We like to emphasize the term “directly” because dividends are the only one of these five alternatives that provide shareholders with an immediate cash return on their investment. Next, we will continue with an example which highlights this distinction: Cintas Corp. (CTAS).

DIVIDEND SPOTLIGHT: CINTAS CORPORATION (CTAS)

We believe that changes in dividend policy can provide valuable insight into management’s expectations for future profitability. Last quarter, one of our portfolio companies, Cintas Corporation, sent yet another of those positive signals.

Cintas Corporation (NASDAQ: CTAS), which provides uniform rental, facility, and first aid and safety services to businesses, recently announced a 16% dividend increase!

This increase extends the company’s impressive record of more than 40 consecutive years of dividend growth; however, we believe its timing and magnitude are especially noteworthy. After several attempts at industry consolidation, the company recently announced an agreement to acquire its next-largest public competitor, UniFirst (NYSE: UNF). Once completed, this $5.5 billion acquisition will provide CTAS with significant revenue and earnings visibility, and importantly for shareholders and our investors, dividend growth.

Given the additional debt and increased integration risks, the company’s substantial dividend increase signals both management’s and the Board’s confidence in Cintas’s long-term financial outlook. In fact, over the past decade, CTAS has grown its dividend at more than a double-digit annualized rate. Most importantly, we believe the company’s post-acquisition earnings and cash flow will continue to support its dividend growth at a similar pace. Indeed, management’s recent actions only strengthens that view.

INVESTMENT TEAM

Marc D. Saurborn, CFA®
CEO and Chief Investment Officer
Evan Carpenter, CFA®
Senior Analyst
William Ford, CFP®
Portfolio Manager
Managing Director, Institutional Asset
Management
Mike Davidoff, CFA®, CFP®
Senior Advisor