Sysco’s Stock Performance and Record Year in Fiscal 2015

Trian Acquires 7.08% Stake in Sysco: What Investors Should Know

(Continued from Prior Part)

Sysco’s stock performance

Trian Fund Management’s 7.08% stake announcement in Sysco (SYY) was well received by the markets. SYY stock rose 7.4% to $41.38 on August 14, the day Trian filed its interest in Sysco with the SEC (Securities and Exchange Commission). According to the SEC filing, members from Trian had discussed performance improvement strategies with Sysco’s president and chief executive officer William DeLaney and non-executive chairman Jackie Ward.

Sysco’s record performance in fiscal 2015

Sysco (SYY) had a very strong performance in fiscal 2015, which ended June 27, 2015. Revenue rose 4.7% to a record $48.7 billion. The company’s adjusted EPS (earnings per share) increased 5.1% year-over-year to $1.84.

Shareholder returns

Sysco’s (SYY) stock has underperformed relative to the sector. SYY has earned total returns of 9.2% over the past year. In contrast, the S&P 500 Consumer Staples Index (XLP) (FXG) has returned 6.9%. Almost 80% of the upside in SYY over the past year has come from its stock price spiking on news that Trian had taken a stake in the company.

Sysco has few listed US peers with a business model and scale that’s strictly comparable. Sysco’s target customer base may choose from a variety of wholesale clubs, grocery wholesalers, and retailers to source their needs.

High dividend payment history

Sysco is a dividend aristocrat, one of a select group of S&P 500 Index stocks that have raised dividends for at least 25 consecutive years. Sysco’s dividend yield at ~3% is high. That’s comparable to the 3% provided by General Mills (GIS), 2.4% by ConAgra Foods (CAG), and 2.9% by Kellogg (K).

The iShares Select Dividend ETF (DVY) provides exposure to SYY with 0.7% weight. As a dividend aristocrat, SYY also makes up 1.7% of the holdings in the SPDR S&P Dividend ETF (SDY).

In the next few articles, we’ll look at the growth opportunities Sysco is eyeing and what Trian hopes to achieve with the stake purchase.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Nelson Peltz’s Activist Fund Trian Is Biggest Sysco Shareholder

• Part 3 - Analyzing Sysco’s Organic and Inorganic Growth Opportunities

• Part 4 - Why Are Sysco’s Expenses Increasing Faster Than Sales?