Good Things Come From SYSCO Corporation (SYY): United Natural Foods, Inc. (UNFI), Core-Mark Holding Company, Inc. (CORE)

Meanwhile, United Natural Foods, Inc. (NASDAQ:UNFI) does not have a dividend policy in place, and Core-Mark only commenced dividend distribution in Oct. 2011. Core-Mark Holding Company, Inc. (NASDAQ:CORE) has a dividend yield of 1.5% and a payout ratio of 27%.

SYSCO Corporation (NYSE:SYY) scores again, and its dividend policy is sustainable given its strong operating margins.

2Q12 Results

Sysco reported a 5.4% increase in its 2Q12 results due to a 2.8% growth across its segments, mainly driven by acquisitions. Operating income decreased 10.4% mainly due to $45 million increase in business transformation expenses, $22 million in charges related to certain items, and a $17 million increase in payroll expenses. Excluding certain items and the transformation expenses, operating income grew 4.6%.

Conclusion

Although the restaurant industry is facing some pressure, I wouldn’t consider it as a major concern for SYSCO Corporation (NYSE:SYY), as 40% of its revenues is derived from sources other than restaurants. Furthermore, the company’s stock price is fairly stable, providing a return of 11% in the last year. Apart from share price appreciation, the company has recently announced a dividend of $0.28.

The company is focused on sustainable growth, improving margins and optimizing its asset management in order to generate additional cash flows. This is corroborated from the recent December 2012 acquisition of 4 foodservice companies with a combined revenue of $520 million. SYSCO Corporation (NYSE:SYY) is aggressively growing through acquisitions, and in FY2013 it acquired a total of nine businesses with combined annual sales exceeding $750 million. Furthermore, the company’s fundamentals are strong and its stock forms one of the biggest holdings of Yacktman Asset Management. The investment firm has invested about 5% of its total assets in the company. Institutional holding and hedge fund buying is always a good sign for any stock (Source: DailyFinance).

Given the above with the added advantage of reliable and ever-increasing dividend, Sysco appears to be a good buy.

The article Good Things Come From Sysco originally appeared on Fool.com and is written by Sujata Dutta.

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