Up to date on October twenty sixth, 2024 by Felix Martinez
The Dividend Kings are a gaggle of 53 firms 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 may see a full downloadable spreadsheet of all 53 Dividend Kings, together with a number of essential monetary metrics resembling price-to-earnings ratios and dividend yields, by clicking on the hyperlink under:
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 is a gorgeous dividend progress inventory as a result of it’s the largest firm in its trade, offering excessive revenue margins and sturdy aggressive benefits.
It additionally has long-term progress potential and the flexibility to extend its dividend annually.
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 simply $115 million gross sales. The corporate has grown steadily over the previous 5 a long time. Within the 2024 fiscal 12 months, Sysco had gross sales of $78.8 billion.
At this time, Sysco is the most important wholesale meals distributor within the U.S. It distributes recent and frozen meals, dairy and beverage merchandise, tableware, cookware, restaurant and kitchen provides, and cleansing provides.
Supply: Investor Presentation
The corporate has a variety of consumers, together with eating places, healthcare services, schooling, authorities places of work, journey, leisure, and retail companies. It additionally has a big section of different buyer sorts, resembling bakeries, church buildings, civic and fraternal organizations, merchandising distributors, and worldwide exports.
In all, Sysco has roughly 730,000 buyer places. Its place atop the meals distribution trade supplies Sysco with high-profit margins and future progress potential.
Development Prospects
Sysco’s working local weather has been challenged over the previous two years. The coronavirus pandemic pressured the closures of eating places and different eating venues that make up Sysco’s buyer base, and provide chain points throughout the nation affected Sysco.
We imagine this objective is attainable as a result of firm’s sturdy enterprise mannequin and spectacular aggressive benefits. The corporate can also be within the strategy of chopping overhead prices, which ought to mildly increase bottom-line progress.
Aggressive Benefits & Recession Efficiency
The U.S. meals service trade is fiercely aggressive. Sysco faces 1000’s of opponents, together with different meals distributors, wholesale or shops, grocery shops, and on-line retailers. Sysco additionally dangers its prospects negotiating instantly with its suppliers.
Nonetheless, Sysco is the most important operator within the trade and has stored opponents at bay for therefore a few years. Sysco estimates that it controls about 17% of the roughly $370+ billion annual foodservice market within the U.S., giving it ample room to proceed increasing.
Supply: Investor Presentation
Sysco operates ~333 distribution services worldwide and serves roughly 730,000 buyer places. This large presence permits Sysco to maintain prices low and move on the advantages to its prospects with aggressive pricing.
One other good thing about Sysco’s enterprise mannequin is that it’s proof against recessions. Everybody has to eat, which provides Sysco a sure degree of demand, whatever the situation of the U.S. financial system.
That is why Sysco’s income held up nicely throughout 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’s earnings per share elevated by double digits in 2008 and 2010, with solely a light dip in 2009. The corporate additionally elevated earnings from 2007 to 2010, a uncommon achievement.
Sysco’s steady trade and prime aggressive place have allowed it to lift its dividend annually, even throughout recessions.
Valuation & Anticipated Returns
Sysco is anticipated to provide adjusted earnings-per-share of $4.60 in fiscal 2025. The inventory has a ahead price-to-earnings ratio of 16.2.
Our honest worth estimate is a price-to-earnings ratio of 20.0, which suggests the inventory is presently buying and selling under honest worth. Rising to this goal valuation would enhance annual returns by 4.1% over the subsequent 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’s present dividend yield is 2.7%, which is larger than the common yield of the broader S&P 500 Index. This results in complete anticipated annualized returns of 13.8% yearly over the subsequent 5 years.
Sysco ought to have little bother rising its dividend going ahead. The corporate has an anticipated dividend payout ratio of 45% for fiscal 2025. This means that the dividend is sufficiently coated and will proceed to extend over time.
Ultimate Ideas
Sysco operates on the prime of its trade. Although it confronted extreme headwinds throughout the pandemic, the ahead outlook is brilliant.
The inventory is undervalued, which means proper now may very well be an opportune time to buy the inventory. We imagine future returns shall be sturdy for buyers shopping for the inventory on the present valuation degree.
In consequence, Sysco stays a high 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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