We recently compiled the list of 25 Best Dividend Aristocrats Stocks According to Analysts. Since Sysco Corporation (NYSE:SYY) is part of our list, we have analyzed the stock in detail.
The age-old debate of investing in dividend growth or high-yield stocks continues to reappear within the dividend investing realm. Between these two, dividend growth is currently the favored option in the market as investors seek out strategies to grow their income over time. In this regard, investors turn to dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years or more. These stocks have delivered strong returns over the years regardless of market conditions. Between February 2005 and December 2023, dividend aristocrats delivered a 12.50% return in falling interest rate periods and an 11.5% return in rising interest rate periods, according to data by Bloomberg.
Numerous analysts have pointed out the long-term potential of dividend growth stocks, a sentiment echoed by Warren Buffett’s investment in Coca-Cola. Back in August 1994, Berkshire Hathaway completed its acquisition of 400 million shares in the company, worth $1.3 billion. Berkshire initially received a cash dividend of $75 million from Coca-Cola in 1994, the amount which surged to $704 million in 2022. This shows a remarkable growth potential of dividend-paying investments over the long term.
With investors showing a growing preference for dividend-paying stocks, major tech companies started initiating their dividend policies this year. Mark Iong, an equity fund manager at Homestead Advisers, expressed his approval of this move by tech companies in one of his recent interviews with Bloomberg. Here are some comments from the analyst:
“Dividends will be table-stakes for big tech going forward. I think if you don’t pay one, it will now be taken as a sign your business is more volatile. What’s exciting is they are doing dividends and buybacks simultaneously, while also cutting costs and growing, which is them stepping on the pedal for profits across the board.”
Not limited to the tech sector alone, companies across the broader market are showing a strong commitment to dividends this year. Though these equities lagged behind the market last year, their outlook remains strong this year. According to a recent report by S&P Dow Jones Indices, in the first quarter of 2024, companies in the index paid $151.6 billion in dividends, up from $146.8 billion paid during the same period last year. In addition, 796 companies reported dividend hikes during the quarter, amounting collectively to $22.7 billion. Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, expects that the index will report a 6% year-over-year increase in dividend payments in 2024.
Now, let’s take a look at some of the best dividend aristocrat stocks to buy according to analysts.
Image by Steve Buissinne from Pixabay
Our Methodology:
For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of May 26. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Sysco Corporation (NYSE:SYY)
Upside Potential as of May 26: 17.7%
Sysco Corporation (NYSE:SYY) is a Texas-based corporation that specializes in the food services distribution industry. For the third quarter of fiscal 2024, the company reported revenue of $19.4 billion, which showed a 2.6% growth from the same period last year. In the first 39 weeks of fiscal, the company returned $1.5 billion to shareholders, including $758.1 million in dividends. Sysco Corporation (NYSE:SYY), currently offers a quarterly dividend of $0.51 per share, having raised it from $0.50, and which translates into a yield of 2.80%. The company is a Dividend King, with 54 consecutive years of dividend growth under its belt.
In its latest earnings release, Sysco Corporation (NYSE:SYY) also provided a strong outlook for the full fiscal year. The company saw revenue growth of 2.7% on the year to $19.4 billion and adjusted EPS increased by 6.7% to $0.96. The EPS came in slightly higher than the consensus estimate of $0.95, but the revenue missed analysts’ expectations by $286 million.
Though Aristotle Capital Management, LLC sold its position in Sysco Corporation (NYSE:SYY), the firm appreciated the company’s financials and management in its first quarter 2024 investor letter.
“During the quarter, we sold our positions in Phillips 66 and Sysco Corporation (NYSE:SYY) and invested in two new positions: Lowe’s Companies and TotalEnergies.
We have owned Sysco, one of the largest food distribution companies in the world, since the fourth quarter of 2022. During our holding period, Sysco’s CEO Kevin Hourican has made progress transforming various aspects of the business, including implementing new technologies able to assist customers with their own changing menus and needs. Through leveraging its scale and purchasing power, we continue to view Sysco as well positioned to gain further share of the highly fragmented U.S. food distribution market, all while sustaining its more than 50-year streak of increasing dividends. Though the company meets each of our criteria for investment, we decided it was the best candidate for sale to fund the purchase of Lowe’s Companies, which we believe is a more optimal investment.”
Sysco Corporation (NYSE:SYY) saw 46 funds from our database holding shares at the end of March, an increase from 39 funds in the previous quarter.
Overall SYY ranks 14th among the best dividend aristocrat stocks according to analysts, but there are other large-cap stocks that are more undervalued. You can visit 25 Best Dividend Aristocrats Stocks According to Analysts to see other dividend aristocrats that are on analysts’ radar. While we acknowledge the potential of dividend growth stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
