Up to date on September twenty second, 2023 by Bob Ciura
The Dividend Kings are a bunch of fifty corporations with 50+ consecutive years of dividend will increase. Broadly talking, they’re among the many highest-quality dividend progress investments in all the inventory market.
You’ll be able to see a full downloadable spreadsheet of all 50 Dividend Kings, together with a number of essential monetary metrics resembling price-to-earnings ratios and dividend yields, by clicking on the hyperlink beneath:
Meals distributor Sysco Company (SYY) has a protracted historical past of regular dividends and common dividend will increase. It has paid a dividend each quarter because it went public in 1970.
Sysco has many enticing qualities as a dividend progress inventory. It’s the largest firm in its business, offering high-profit margins and sturdy aggressive benefits.
It additionally has long-term progress potential and the power to extend its dividend every year.
Enterprise Overview
Sysco was based in 1969 and went public the next 12 months. In its first 12 months as a publicly-traded firm, it had gross sales of simply $115 million. The corporate has grown steadily over the practically 5 many years since. Within the 2023 fiscal 12 months, Sysco had gross sales of $76.3 billion.
At present, Sysco is the biggest wholesale meals distributor within the U.S. It distributes merchandise together with recent and frozen meals and dairy and beverage merchandise. It additionally offers different merchandise, together with tableware, cookware, restaurant and kitchen provides, and cleansing provides.
Supply: Investor Presentation
The corporate has a variety of shoppers, together with eating places, healthcare amenities, schooling, authorities workplaces, journey, leisure, and retail companies. It additionally has a big section of different buyer varieties, resembling bakeries, church buildings, civic and fraternal organizations, merchandising distributors, and worldwide exports.
In all, Sysco has roughly 700,000 buyer places. Its place atop the meals distribution business offers Sysco with high-profit margins and future progress potential.
Progress Prospects
The working local weather for Sysco was challenged over the previous two years because the coronavirus pandemic compelled closures of eating places and different eating venues that make up Sysco’s buyer base. Additionally, provide chain points throughout the nation affected Sysco.
On August 1st, 2023, Sysco reported fourth-quarter outcomes for Fiscal Yr (FY) 2023. Within the fourth quarter, Sysco achieved a 4.1% gross sales enhance in comparison with the identical interval within the earlier fiscal 12 months, with U.S. Foodservice quantity rising by 2.3%. Adjusted EPS rose by 16.5% to $1.34, in comparison with the earlier fiscal 12 months.
For all the fiscal 12 months 2023, Sysco grew income by 11% with a 5.2% rise in U.S. Foodservice quantity. Adjusted earnings-per-share elevated 23% to $4.01.
In our view, the mixture of natural gross sales progress, acquisition-added income progress, and share repurchases is anticipated to lead to 7% annual earnings-per-share progress.
We imagine that is an attainable objective as a result of firm’s sturdy enterprise mannequin and spectacular aggressive benefits. The corporate can be within the means of reducing overhead prices, which ought to mildly enhance bottom-linegrowth.
Aggressive Benefits & Recession Efficiency
The U.S. meals service business is fiercely aggressive. There are literally thousands of rivals to Sysco, together with different meals distributors, wholesale or stores, grocery shops, and on-line retailers. Sysco additionally faces the chance of its clients negotiating immediately with its suppliers.
Nevertheless, Sysco is the biggest operator within the business and has saved rivals at bay for thus a few years. Sysco estimates that it controls about 17% of the roughly $300+ billion annual meals service market within the U.S., giving it a lot of room to proceed increasing.
Supply: Investor Presentation
Sysco operates ~333 distribution amenities worldwide and serves roughly 700,000 buyer places. Such an enormous presence permits Sysco to maintain prices low, and it might cross on the advantages to its clients with aggressive pricing.
One other good thing about Sysco’s enterprise mannequin is that it’s immune to recessions. Everybody has to eat, which supplies Sysco a sure stage of demand, whatever the situation of the U.S. economic system.
Because of this Sysco’s income held up properly through the Nice Recession:
2007 earnings-per-share of $1.60
2008 earnings-per-share of $1.81 (13% enhance)
2009 earnings-per-share of $1.77 (2% decline)
2010 earnings-per-share of $1.99 (12% enhance)
Sysco grew earnings-per-share at a double-digit tempo in 2008 and 2010, with solely a gentle dip in 2009. The corporate grew earnings from 2007 to 2010, which was a uncommon achievement.
Sysco’s secure business and high aggressive place have allowed it to boost its dividend every year, even throughout recessions.
Valuation & Anticipated Returns
Sysco is anticipated to provide adjusted earnings-per-share of $4.30 in fiscal 2024. The inventory has a ahead price-to-earnings ratio of 16.0.
Our honest worth estimate is a price-to-earnings ratio of 20.0, which suggests the inventory is presently buying and selling beneath honest worth. Rising to this goal valuation would enhance annual returns by 4.6% over the following 5 years.
We additionally count on Sysco to ship 7% annual earnings progress going ahead, consisting of natural progress, acquisitions, and share repurchases.
As well as, Sysco has a present dividend yield of two.9%, which is the next yield than the common yield of the broader S&P 500 Index. This results in whole anticipated annualized returns of 14.5% yearly over the following 5 years.
Sysco ought to have little hassle growing its dividend going ahead. The corporate has an anticipated dividend payout ratio of 48% for fiscal 2024. This means that the dividend is sufficiently coated and will proceed to extend over time.
Last Ideas
Sysco operates on the high of its business. Although it confronted extreme headwinds through the pandemic, the ahead outlook is shiny.
The inventory is undervalued, that means proper now might be an opportune time to buy the inventory. We imagine future returns might be robust for buyers shopping for the inventory on the present valuation stage.
Consequently, Sysco stays a top quality holding inside a dividend progress portfolio and a purchase on the present worth.
The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend progress buyers:
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