Company Description: SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. SYY is trading at a discount 1.) and 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, SYY is trading at a slight premium (2.1%). A Star is added since SYY is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. SYY earned all available Stars in this section. SYY’s rolling 4-yr dividend growth averaged over 15%, it has grown dividends for at least 10 years (20+ years) and its 1-year growth rate is greater than its 5-year growth rate.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. SYY earned one Star in this section. SYY’s NPV MMA Diff. is $18,568, which is in excess of the $10,000 I look for.
Other: SYY is a member of the S&P 500, is not an Aristocrat, but is an Achiever. SYY is the largest U.S. marketer and distributor of foodservice products. It should continue to grow internally and via acquisitions. Even amidst of the difficult consumer discretionary environment, it is believed that SYY is gaining market share.
Conclusion: SYY earned a Star in the Fair Value section, picked up four Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a net total of six Stars. However, my scale tops out at five Stars, which rates SYY as a 5-Star BUY.
SYY is a good, stable performer. Over the last 10 years it has averaged 18.1% dividend growth, with double-digit growth in every year except 2001, when it grew at only 4.5%. I will continue to add to my position as my allocation and SYY’s valuation allows.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I owned shares of SYY (2.7% of my Income Portfolio).
What are your thoughts on SYY?
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