Sysco Corporation (SYY) Shows Long-Term Investment Value and Strong Dividends

With question marks hanging over the economic rebound, investors continue to seek out sectors which would be considered more defensive. One such industry is that of food distribution which has held up quite well over the last three years despite slumping economic activity across the board.

 

For investors looking for these defensive characteristics and a useful dividend yield, one stock to consider is Sysco Corporation (SYY).

 

The company is the global leader in the selling, marketing and distributing food products to restaurants, healthcare and educational facilities and has annual operating profits of just under $2bn.

 

In the Fortune Magazine rankings of 2009 in terms of most admired companies, Sysco (SYY) picked up a number of accolades including being ninth most respected company in terms of financial soundness, number eight in terms of long-term investment value and fourth placed for quality of management.

 

Shareholders won't be moaning either with a handy 3.3% dividend yield and a track record of having raised its dividend every year since 1993.

 

Since its listing in 1970, when sales were $115 million, Sysco (SYY) has grown into a business which generates sales in excess of $37 billion each year and has grown its customer base to in excess of 400,000 in over 170 locations in the US, Canada, Alaska and Hawaii.

 

In May the company reported third quarter earnings with sales coming in at $8.9 billion up 2.4% from the same quarter in the previous year while operating income was up 6.6% to $432 million. Cash flow from operations was $466 million for the first 39 weeks of the financial year.

 

The underlying business environment appears to be improving, as evidenced by both the case volume growth and easing of deflation that was realized as the quarter progressed.

 

While Sysco (SYY) trades on a price to earnings (PE) multiple which is perhaps a bit richer than its peers (around 16 times historical earnings), the quality of management, the strong dividend track record and its market leading positions in the sectors in which it operates makes it a natural beneficiary of the rebounding economy.