To bolster shareholder value, the board of
) recently approved an increase of 1 cent in its quarterly
dividend to 29 cents. The dividend hike translates to a 3.6%
increase from the prior dividend of 28 cents and comes exactly
after a year. The increased dividend will be paid on Jan 24, 2014
to stockholders of record as of Jan 3, 2012.
This food company has been paying dividends every quarter
since 1970 and this is the 45th hike in its dividend. The last
dividend hike of a cent or 3.7% was announced on Nov 14, 2012 and
paid on Jan 25, 2013.
Besides dividend, the company also has a solid buyback program
in place and has been repurchasing shares since 1992. In Aug,
2013, the board of Sysco approved its 18th share repurchase
program comprising 20 million shares. The share repurchase
program is part of an ongoing effort to keep the number of shares
outstanding relatively constant.
We appreciate Sysco's efforts to consistently enhance
long-term shareholder value amid a volatile economy. While
dividend payments boost shareholder wealth, a share buyback
program helps the company to reduce outstanding share count,
thereby increasing earnings per share and return on equity.
In the recently concluded first quarter fiscal 2014 on Oct 23,
Sysco generated $169 million of cash from operations. Capital
expenditure in the first quarter of fiscal 2014 was approximately
$136 million related to facility replacements, expansions and
replacements to Sysco's fleet.
Cash and cash equivalents were $359.5 million at the end of
Sep 28, 2013 compared with $412.3 million at the end of Jun 29,
2013. Long-term debt was $2.87 billion at the end of first
quarter compared with $2.64 billion at the end of the fourth
Sysco, a global leader in selling, marketing and distribution
of food products, beat the Zacks Consensus Estimate on both
counts driven by acquisitions. However, earnings of 56 cents
declined 3.4% year over year due to weak restaurant traffic. The
year-over-year results were also dampened by a sluggish
macro-economic scenario and weather related headwinds.
Overall, we appreciate the company's strategy of growth
through acquisitions and its efforts to reduce costs and improve
efficiency. However, we are concerned about rising costs due to
fuel price hikes and other inputs, which hurt margins.
Sysco holds a Zacks Rank #3 (Hold). However, other food
companies that are worth considering include
Omega Protein Corp
Pinnacle Foods Inc
The J.M. Smucker Co.
). While Omega holds a Zacks Rank #1 (Strong Buy), Pinnacle Foods
and Smucker carry a Zacks Rank #2 (Buy).
OMEGA PROTEIN (OME): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
SYSCO CORP (SYY): Free Stock Analysis Report
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