Decreased profitability also impacted its cash flows. Still, the company has a strong cash position to support dividends. Its free cash flows provide cover to its dividend. In the TTM, its free cash flows stand at $731 million when dividend accounts for $640 million.
SYSCO Corporation (NYSE:SYY)’s financial health displays no risk of solvency. Its high current and quick ratios symbolize this trend. At the end of the latest quarter, its current and quick ratios stand at 1.74 and 1.2, respectively. Debt to equity is also in line with the industry average of 0.5. High current and quick ratios demonstrate that the company has sufficient cash resources to pay current liabilities.
Industry Analysis
One of Sysco’s main peers in the food and staples retailing industry is United Natural Foods, Inc. (NASDAQ:UNFI), Inc. In the consumer staples sector, it is competing with Core-Mark Holding Company, Inc. (NASDAQ:CORE). United Natural Foods distributes organic, natural and specialty foods and non-food products in Canada and United States. Over the past ten years, it has been a primary supplier to Whole Foods. It is also increasing its revenue base by targeting supermarkets, gourmet stores and food service producers. United Natural Foods, Inc. (NASDAQ:UNFI) do not offer any dividends at present. It is a growth stock. The stock looks pricey with the current valuation. It looks pricey to me with PE and PB ratio of 26.6 and 2.5 when industry average is at 19.0 and 2.0. However, this company has shown solid financial performance over the years.
Core-Mark markets fresh and broad-line supply solutions to the convenience retail industry in North America. The compactness of Core-Mark’s strong and diverse revenue base give the company with steady revenue streams and potential growth opportunities. As a result, in the past three years, its revenue growth on average stands at 10.8%. The company is benefiting from the increased focus on fresh food and the growth in single convenience stores. Core-Mark look undervalued compared to its peers with a P/E and PB ratios of 20.0 and 1.7.
Final Notes
SYSCO Corporation (NYSE:SYY) is one of the best companies in the food distribution industry. It has been providing solid returns to investors. It has a dependable financial situation to back its dividends. The company’s cash reserves are enough to pay current liabilities and dividends. It has shown excellent management, very good consumer satisfaction and an intense concentration on quality assurance.
siraj sarwar has no position in any stocks mentioned. The Motley Fool recommends SYSCO Corporation (NYSE:SYY).
The article Sysco Corporation: Strong Dividends Set to Continue originally appeared on Fool.com.
siraj is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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