Sysco Is About To Raise Its Dividend—What Should Investors Expect?

Sysco Corporation (SYY) is a steady dividend stock that has rewarded investors for a very long time. Since 1970, Sysco has raised its dividend 47 times.

This makes Sysco one of only 50 Dividend Aristocrats – stocks wiht 25+ consecutive years of dividend increases in the S&P 500.

The company has an amazing track record of dividend increases, but its dividend record lately has been much less impressive.

Sysco is highly profitable, but it isn’t growing at high rates. This has limited its ability to raise its dividend over the past few years.

It has been one full year since Sysco’s last dividend increase. It typically increases its dividend in November. And, since its investors hold the stock largely for the dividend, it is reasonable to think the company will raise its dividend by the end of the month.

This article will provide a framework for what Sysco investors should expect when the company increases its dividend.

Business Fundamentals

Sysco is a food distributor. It services a wide range of customers, primarily restaurants. But it also serves many other industries as well.

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SYY-Customer-Type.jpg (710×162)

Source: 2015 Annual Report, page 3

Sysco has had an amazing history. In its first year after going public in 1970, total sales were $115 million. Last year, Sysco’s sales eclipsed $50 billion. That is a huge growth rate over Sysco’s history.

And yet, the recent past has been much more difficult for the company. Sysco’s earnings-per-share have declined 14% over the past five years.

A big reason for this is rising operating expenses. Sysco operates in a highly competitive industry. In fact, in its 2015 annual report, Sysco noted there are more than 16,500 companies engaged in foodservice distribution.

The company needs to spend significant amounts of money to retain market share. But this spending has worked successfully, as the company captures 16.4% of the massive $295 billion U.S. foodservice market.

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