We recently compiled a list of 10 Best Dividend Aristocrats According to Wall Street Analysts. In this article we are going to take a look at where Sysco Corporation (NYSE:SYY) stands against the other dividend aristocrats.
Shifts in investment trends have revealed new insights for investors in recent years. Certain times call for specific investments, and it’s often experienced investors who can spot these opportunities. However, it’s clear that the value of a good investment remains steady, even amidst ongoing changes. This is where the long-standing dividend aristocrats play a role. These companies are strong dividend payers, having raised their payouts for at least 25 consecutive years.
The extended periods of dividend increases have significantly boosted the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with lower volatility, according to a report by ProShares. In addition, these stocks demonstrated strong performance in all market conditions, capturing 90% of market gains while only experiencing 82% of market declines. Also read: 10 Best Dividend Aristocrats with Over 3% Yield.
Achieving 25 consecutive years of dividend growth is quite an accomplishment. Out of approximately 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats index in 2024. This highlights that only a small number of companies have reached this milestone. Maintaining a record of annual dividend increases for 25 years means the company has managed to boost shareholder payouts through various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined management of capital. Even dividend aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M were unable to sustain their decades-long dividend growth streaks and have been removed from the Dividend Aristocrats club this year. This highlights the importance of financial strength for dividend aristocrats. The Great Financial Crisis exposed the financial vulnerabilities of these dividend-growers, as 17 out of the 60 Aristocrats in the S&P 500 were removed in 2008 and 2009.
As mentioned before, dividend aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, a senior managing director and portfolio manager at Wellington Management, has noted this performance, particularly with the Vanguard Dividend Growth fund, which he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 market crash, while the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount, thanks to its dividend-generating stocks. As the market recovered, the fund quickly made up for its losses, outperforming many of its peers. Kilbride further mentioned that dividend growth is crucial for weathering tough markets and achieving long-term success, stating that its benefits are substantial and enduring.
According to analysts, for those building their portfolios, incorporating dividend investments can be beneficial, particularly if the dividends are reinvested. By using dividends to purchase additional shares each time they are received, investors create a cycle where payouts increase with the number of shares owned, leading to the ability to acquire even more shares. In this article, we will take a look at some of the best dividend aristocrat stocks according to analysts.
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 August 7. 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).
A butcher shop showcasing fresh meats and seafood for customers.
Sysco Corporation (NYSE:SYY)
Analyst Upside Potential as of August 7: 12.8%
Sysco Corporation (NYSE:SYY) is an American wholesale corporation that is involved in the marketing and distribution of food products, kitchen equipment, and related products. The company is continuously pursuing growth opportunities. In October, it began construction on a new $102 million distribution center in Arizona, set to be operational by spring 2025. In addition, the company announced the acquisition of Edward Don & Company, a prominent distributor of food service equipment, supplies, and disposables. These steps are positively impacting the company’s revenues and cash flows.
In its recently announced fiscal Q4 2024 earnings, Sysco Corporation (NYSE:SYY) reported revenue of $20.5 billion, which showed a 4.2% growth from the same period last year, and also beat analysts’ consensus by $41.6 million. The company’s financial performance for the quarter and year reflected market share gains, significant profit growth, strategic investments, and strong annual cash flow. The company’s balanced approach to increasing revenue and managing margins led to solid bottom-line results. The International business, in particular, showed impressive results, with a 19.4% rise in operating income and a 23.6% increase in adjusted operating income for the year. Street analysts maintain a Strong Buy rating on SYY with an $85.6 price target, which shows a 13% upside potential.
As mentioned above, Sysco Corporation (NYSE:SYY)’s strong cash position allows it to distribute profits to shareholders generously. In FY24, the company reported an operating cash flow of $3 billion, which showed a 4.2% growth from the prior year period. Its free cash flow also grew 5.6% YoY to $2.2 billion. During the fiscal year, it returned $2.2 billion to shareholders through dividends and share repurchases. Sysco Corporation (NYSE:SYY) holds a 54-year streak of consistent dividend growth, which makes SYY one of the best dividend aristocrat stocks on our list. The company pays a quarterly dividend of $0.50 per share and has a dividend yield of 2.69%, as of August 7.
The number of hedge funds tracked by Insider Monkey owning stakes in Sysco Corporation (NYSE:SYY) grew to 46 in Q1 2024, from 39 in the previous quarter. These stakes have a collective value of over $1.2 billion.
Overall SYY ranks 9th on our list of the best dividend aristocrats to buy according to Wall Street Analysts. While we acknowledge the potential of SYY as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than SYY but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
