Most of the hype in the dividend stock investing community focuses on stocks that already offer lofty dividend payments. However, where these high-yield dividend stocks pay out more to investors upfront, most provide minimal dividend growth over the long haul.

As a devout buy-to-hold investor who tries to think in decades, I am much more interested in dividend growth stocks that may offer a smaller payout today but massive passive income potential in the future.

A perfect example of a stock that fits this description is unsung hero Cintas (CTAS -0.53%). The company currently pays a 0.8% dividend yield. Yet investors who bought and held the stock 10 years ago would now receive an 8% yield compared to their original cost basis, as dividend payments rose sevenfold over that time.

As impressive as this dividend growth is, Cintas shows no signs of slowing its rising payouts to investors. Following a 20% drop in share price over the last month, here’s what makes Cintas a magnificent S&P 500 dividend stock to consider buying in 2025.

Cintas: Leading its niche, but plenty of growth remains

Whether renting and laundering uniforms, servicing or supplying restrooms, or restocking everyday items, Cintas is the market leader in ensuring businesses are ready for the workday.

Chief Executive Officer Todd Schneider recently summarized the company’s operations as follows: “Virtually every business has a need Cintas is ready to meet, whether it’s a front door that needs a mat, a bathroom to service, exit lighting, fire extinguishers and sprinkler systems, first aid and safety needs, or an apparel solution.”

The company serves more than 1 million businesses, with 70% of its customers coming from services sectors like healthcare, food, and hospitality and 30% from goods-producing markets like manufacturing and construction.

Growing to become the leader of this unique niche across North America, Cintas turned a $1,000 investment in 1989 into $1.1 million today for its shareholders.

However, don’t think for a second that Cintas’ time in the limelight is over.

Since North America is home to more than 16 million businesses, the company’s penetration rate remains relatively low, leaving ample room for further growth. Most importantly for investors, Cintas’ long-tenured management has a lengthy history of delivering profitable growth, as evidenced by the company’s high and rising return on invested capital (ROIC) and improved cash generation.

Ballooning profitability funds Cintas’ robust shareholder returns

Cintas’ revenue has risen by 9% annually over the last decade as the company fueled its expansion through mergers and acquisitions (M&A) and organic growth. However, the company’s improving cash generation is what has made Cintas such an incredible stock recently.

CTAS Cash from Operations (TTM) data by YCharts

Since 2014, Cintas’ cash from operations nearly quadrupled, while capital expenditures only doubled. In simplest terms, these figures mean the company generated much more cash while spending relatively less on capex to do so, causing a spike in the amount of free cash flow (FCF) created.

Generating this outsized allotment of FCF compared to its debt and equity, Cintas maintains a top-tier cash ROIC of 27%, which ranks in the top 10% among S&P 500 stocks. As this article shows, stocks with high ROICs, like Cintas, have historically outpaced the returns of their lower-ranked peers.

As the company adds new customers to its 11,000-plus distribution routes (whether through new customer acquisition or M&A), its logistical network becomes more “dense,” making it increasingly profitable.

Thanks to this ballooning profitability and cash generation, the company has grown its dividend payments by 26% annually over the last decade. Even after this increase, though, Cintas only uses 30% of its FCF to fund these payments, meaning it could theoretically double its 0.8% dividend yield without disrupting its operations.

In addition to this dividend growth, the company has lowered its outstanding shares by 1.5% annually since 2014, further boosting shareholder returns.

Cintas’ 20% drop is an opportunity, not a time to panic

Despite beating earnings expectations and raising the midpoint of its guidance on Dec.19th, Cintas has seen its stock drop by 20% since.

However, this reaction stems more from the market pricing Cintas’ stock for perfection than from anything wrong with the business. In fact, during the second quarter, the company grew sales, FCF, and dividend payments by 8%, 14%, and 15%, respectively, which are fantastic results.

Now trading at just 41 times FCF — versus 51 a month ago — Cintas is much closer to the S&P 500’s average price-to-FCF in the low 30s. Though this is far from cheap, Cintas’s non-discretionary operations, long remaining growth runway, improving cash generation, and rapidly growing dividend make it worthy of this premium valuation.

While Cintas isn’t a traditional “deep-discount buy” today, I’m confident that 10 years from now, I’ll be happy I bought a handful of shares of this magnificent dividend growth stock at a fair price in 2025.