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Sysco (SYY) Hikes Dividend: What Else You Should Know?

Zacks Equity Research

Sysco Corporation SYY is focused on boosting investors’ sentiments through several growth initiatives and shareholder-friendly moves. To this end, the company announced a 15% hike in its quarterly dividend, taking it from 39 cents a share to 45 cents. This is payable on Jan 24, 2020 to shareholders of record as on Jan 3.

Sysco has been committed toward boosting shareholders’ returns for quite a few years now. In fact, this marks the 51st hike for the food company, which has been paying out dividends every quarter since 1970. The last hike of 3 cents or 8% was announced on Nov 15, 2018.  

We appreciate Sysco’s efforts to consistently enhance long-term shareholder value. Markedly, dividend hikes not only enhance shareholder returns but also raise the market value of the stock. Through this strategy, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it.

Apart from dividend hikes, Sysco also concentrates on other efficient capital allocation strategies, like prudent mergers and acquisitions, share buybacks, debt repayment, and capital expenditures.

Talking of mergers and acquisitions, the company recently announced the buyouts of Hawaii based sister companies namely Armstrong Produce and Kula Produce. The acquisitions will form part of Sysco’s specialty produce company, FreshPoint, within the broader U.S. Foodservice Operations. Prior to this, it announced the buyout of J. Kings Food Service Professionals on Aug 12. It also acquired sister firms, J & M Wholesale Meats and Imperio Foods.

Apart from this, the company is benefiting from its strategies for 2020, which include enhancing consumers’ experience, optimizing business, stimulating power of its people and achieving operational efficacy. In this regard, the company focuses on enhancing assortments, making constant innovation, ensuring food safety and revitalizing brands. Further, to evolve with the changing consumer preferences, the company is committed to investing in technology and enhancing e-commerce operations.

Moreover, Sysco plans to improve supply chain, increase transparency, enhance deliveries and manage product costs effectively. In fact, the company is on track with its cost-saving initiatives. In connection with this, it is focusing on its Smart Spending initiative, which involves a detailed analysis of indirect spending categories. This is aimed at spotting such areas and making cost curtailments accordingly. Additionally, Sysco is committed to lowering its overall administrative costs.

 

Backed by such upsides, shares of this Zacks Rank #3 (Hold) company have increased approximately 13% in the past three months, outperforming the industry’s growth of 3.4%.

3 Stocks to Watch

McCormick & Company, Inc. MKC has a long-term earnings growth rate of 8% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kimberly-Clark Corp. KMB has a long-term earnings growth rate of 5.5% and a Zacks Rank #2.

Philip Morris International Inc. PM, also with a Zacks Rank #2, has a long-term earnings growth rate of 7.9%.

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