Dividend Aristocrat Overview: Sysco Corporation

About Sysco Corporation

Providing food preparation services to hotels, hospitals, schools and other facilities has allowed Sysco to grow its dividends since 1977. Photo courtesy karen_2873/flickr.com.

Providing food preparation services to hotels, hospitals, schools and other facilities has allowed Sysco to grow its dividends since 1977.
Photo courtesy karen_2873/flickr.com.

Sysco Corporation is the global leader in the distribution of food and food related products to customers around the world.  These customers include restaurants, hotels and motels, schools and colleges, industrial caterers, and healthcare facilities that prepare meals away from home.  Sysco’s business is divided into two primary operating segments: Broadline operating companies, which represents 81% of sales, distributes food and food related products to Sysco’s customers, and SYGMA operating companies, representing 13% of sales, focuses on supplying chain restaurant locations.  The remaining 5% of sales comes from other smaller segments, including specialty produce companies and lodging industry products companies.  The specialty produce segment distribute fresh produce and the lodging industry products segment provides personal care guest amenities, housekeeping supplies and other hotel and motel supplies to the lodging industry.  In total, Sysco’s 48,000 employees supply over 400,000 products to the company’s 425,000 customers.

Sysco generated $992 million in net earnings in the company’s 2013 fiscal year (which runs July 2012 – June 2013), down 11.5% from 2012.  Revenues were up 4.7% in 2013 to $44.4 billion.

The company is a member of the S&P 500 index and a Fortune 500 company, and trades under the ticker symbol SYY 

Sysco Corporation’s Dividend and Stock Split History

Sysco Corporation has paid dividends since coming public in 1970 and has increased dividends at least annually since 1977.  In 2001 Sysco met the Dividend Aristocrat criteria of 25 consecutive years of increasing regular dividend payments.  Sysco has announced dividend increases in the first quarter of the calendar year.  I expect Sysco to announce their next dividend increase in November and to pay out the new dividend in January 2015.

After growing dividends by more than 10% a year for more than 30 years, Sysco has recently slowed dividend growth. Data retrieved from the Sysco Investor Relations website.

After growing dividends by more than 10% a year for more than 30 years, Sysco has recently slowed dividend growth.
Data retrieved from the Sysco Investor Relations website.

While Sysco has a decent long-term record of dividend growth, recently the dividend increases have been fairly small.  At the beginning of 2014, Sysco increased their quarterly dividend by a penny, or 3.6%, from 28 cents to 29 cents.  In fact, the company has not increased its dividend by more than 5% per year for the last 5 years, clearly impacted by a 4-year decline in net earnings and operating income, and resulting in a 5-year compounded annual dividend growth rate (CADGR) of 3.86%.  Prior to that, Sysco Corporation had increased dividends by double-digit percentages in 32 of 33 years.  This excellent dividend growth history results in a 10-year and 20-year CADGR of 8.78% and 13.63%, respectively.  Over 25 years, Sysco has a CADGR of 16.55%.

Sysco has split its stock nine times since coming public in 1970.  In February 1973, Sysco stock split 5-for-4, followed by 3-for-2 splits in June 1979 and December 1980.  Since then, Sysco stock has split 2-for-1 six more times: in May 1982, March 1986, October 1989, June 1992, March 1998, and December 2000.  Although not having split since, had you purchased 100 shares of Sysco stock in the middle of 2001 when the company increased dividends for the 25th straight year, you would have paid about $2,000 and collected $29.50 in dividends over the following 12 months.  In 2014, you could expect those 100 shares to collect $112 in dividends and with the share value having grown at an average annual rate of 6.35%, they would have been worth $3,700 (ignoring reinvested dividends).

Direct Purchase and Dividend Reinvestment Plans

Sysco has both direct purchase and dividend reinvestment plans.  Investors interested in participating in either of these plans can find information at Sysco’s trustee agent, American Stock Transfer & Trust Company.  If you are interested, you must invest a minimum of $100 per cash or direct debit purchase.

There are no fees on any dividend reinvestments.  For direct purchases, there is a service fee of $2.50 plus 5 cents per share.  If you sell your shares in the plan, you’ll pay $10 plus 5 cents per share.  You can minimize your fees by buying and selling shares in larger quantities.

Helpful Links

Sysco Corporation’s Investor Relations Website

Current quote and financial summary for Sysco Corporation (finviz.com)

Information on the direct purchase and dividend reinvestment plans for SYY


Want to find out about more great dividend growth stocks?

Check out the list of current S&P Dividend Aristocrats.

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