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Sysco Stock Analysis

Sysco Corporation (SYY), through its subsidiaries, markets and distributes a range of food and related products primarily to the foodservice industry in the United States. Sysco is a dividend champion has paid uninterrupted dividends on its common stock since 1933 and increased payments to common shareholders every year for 41 years.

The most recent dividend increase was in November 2010, when the Board of Directors approved a 4% increase to 26 cents/share.

Over the past decade this dividend growth stock has delivered an annualized total return of 3.90% to its shareholders.

The company has managed to deliver an increase in EPS of 9.50% per year since 2001. Analysts expect Sysco to earn $1.97 per share in 2011 and $2.07 per share in 2012. In comparison Sysco s earned $1.99 /share the company earned in 2010. The company has managed to consistently repurchase 1.50% of its common stock outstanding over the past decade through share buybacks.

The company has managed to generate high returns on equity, which had consistently remained above 29%. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment has increased by 15.30% per year over the past decade, which is much higher than the growth in EPS.

A 15% growth in distributions translates into the dividend payment doubling almost every five years. If we look at historical data, going as far back as 1975, we see that Sysco has actually managed to double its dividend every four years on average.

Over the past decade the dividend payout ratio increased from 26% to 49%. The primary reason behind this steep increase was that dividends increased at almost twice the rate of earnings growth. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently Sysco is trading at 15.80 times earnings, yields 3.40% and has a sustainable dividend payout. The company currently fits my entry criteria and I would look to add to my position in it subject to availability of funds.

Full Disclosure: Long SYY

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