Sysco‘s (NYSE: SYY) dividend history is long and steady. The company has paid a dividend every quarter since going public in 1970. The payout consistency might make Sysco a great income investment. Let’s check out the business and Sysco’s dividend trends…
Sysco Business Overview and Highlights
Sysco is a food marketing and distribution company that supports customers in 90 different countries. Sysco operates out of Houston, Texas and is the largest food distributor in the U.S.
Sysco is valued at $35 billion and employs 67,000 people. Last year, Sysco pulled in $59 billion in sales. That works out to $877,000 per worker.
The company has achieved a credit rating of BBB+ from the S&P. (That’s an investment grade rating, and it allows Sysco to issue low interest rate debt to expand its business and pay dividends. )
As mentioned before, Sysco has paid a dividend every quarter since 1970. We can look at the dividend trend over the last year to determine Sysco’s valuation.
Sysco Dividend History Over 10 Years
Sysco paid investors $0.94 per share a decade ago. But over the last 10 years, the dividend has climbed to $1.41. That’s a 50% climb. The annual changes are in the chart below.
The compound annual growth is 4.1% over 10 years… but over the last year, the dividend jumped 8.5%. The dividend growth increase is a good sign, but we need to look at more to determine if it’s a worthwhile income investment.
Sysco’s Current Dividend Yield vs. 10-Year Average
Sysco’s dividend history shows that it’s been one of the best dividend stocks around. The long history makes Sysco’s dividend yield a useful indicator of value. In general, a higher yield is better for new investors.
Sysco’s dividend yield is 2.16% – well below the 10-year average of 3.75%. The following chart shows Sysco’s dividend yield over the last 10 years:
The lower dividend yield indicates that stock buyers have bid up Sysco’s market value. They might be expecting higher growth and payouts. But more often than not, the dividend yield reverts to the mean based on share price changes.
Is Sysco’s Dividend Safe?
When researching dividend safety, investors generally look at the dividend payout ratio, or the dividend per share divided by the net income per share. So a dividend payout ratio of 75% would mean that for every $1 Sysco earns, it pays investors $0.75.
Sysco’s dividend payout ratio is a good starting indicator of dividend safety… but net income is manipulated. Accountants adjust for goodwill and other non-cash items. A more useful metric is usually free cash flow.
Here’s Sysco’s dividend payout ratio history based on free cash flow.
Sysco’s dividend free cash flow payout ratio shows the dividend is safe for now
Sysco’s dividend payout ratio spiked well above a safe level… but the trend is down, and Sysco’s dividend looks safe for the next few years. The last reported year shows a payout ratio of 50.1%. This gives plenty of room for Sysco’s board of directors to continue raising the dividend.
Closing Thoughts: Sysco’s Dividend History and Safety
Although Sysco has a safe dividend, the yield has dropped to low levels. There are better income stocks available in the current market.
If you’re interested in seeing more, please comment below. You can also check out our free dividend reinvestment calculator.
Good investing,
Rob
