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Important news for shareholders and potential investors in Sysco Corporation (NYSE:SYY): The dividend payment of US$0.39 per share will be distributed to shareholders on 26 April 2019, and the stock will begin trading ex-dividend at an earlier date, 04 April 2019. Is this future income a persuasive enough catalyst for investors to think about Sysco as an investment today? Below, I'm going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Sysco fit our criteria?
The current trailing twelve-month payout ratio for the stock is 52%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect SYY's payout to fall to 39% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.4%. However, EPS should increase to $3.44, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. SYY has increased its DPS from $0.96 to $1.56 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes SYY a true dividend rockstar.
In terms of its peers, Sysco has a yield of 2.3%, which is high for Consumer Retailing stocks but still below the market's top dividend payers.
Keeping in mind the dividend characteristics above, Sysco is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I've put together three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SYY’s future growth? Take a look at our free research report of analyst consensus for SYY’s outlook.
- Valuation: What is SYY worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SYY is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.