Dividend Aristocrats In Focus Part 40: Sysco

Sysco Corporation (SYY) started out as a small company with a simple mission: to assist food service companies in providing customers with quality meals consumed away from home.

The company went public in 1970. That year, it had sales of $115 million. Last year, Sysco’s sales exceeded $50 billion.

Today, Sysco approximately 425,000 customers. It operates in 194 locations throughout the U.S., Bahamas, Canada, and Ireland. The company has more than 50,000 employees.

Sysco is a Dividend Aristocrat, an exclusive group of companies in the S&P 500 that have increased dividends for at least 25 years in a row. You can see the entire list of Dividend Aristocrats by clicking here.

Sysco has increased its dividend 47 times in the past 46 years.

Business Overview

Sysco is in the food distribution industry. It provides food products to a wide variety of customers. A breakdown of Sysco’s customer base is as follows:

  • Restaurants (63% of sales)
  • Healthcare (9% of sales)
  • Education/Government (8% of sales)
  • Travel/Leisure/Retail (8% of sales)
  • Other (12% of sales)

The ‘other’ category includes bakeries, churches, civic and fraternal organizations, vending distributors, and international exports.

The food service industry in the U.S. is enormous.

syy-industry

Source: Jefferies 2016 Consumer Conference, page 6

The downside of operating in such a huge industry is that there is not much room for growth. On the other hand, it provides Sysco with its main competitive advantage, which is economies of scale.

In order to generate growth, Sysco is aggressively pursuing acquisitions.

Growth Prospects

Sysco’s earnings-per-share growth over the past several years has disappointed. In fact, the company’s earnings-per-share were lower last year than five years ago.

syy-five-year-financials

Source: 2016 Annual Report, page 23

Sysco continues to grow, both organically and through acquisition. Its most important acquisition this year was a $3.1 billion takeover of U.K.-based Brakes Group.

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