Sysco's (NYSE:SYY) Upcoming Dividend Will Be Larger Than Last Year's

Sysco Corporation (NYSE:SYY) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of July to $0.51. This makes the dividend yield 2.7%, which is above the industry average.

See our latest analysis for Sysco

Sysco's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Sysco's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 29.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sysco Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $1.12 total annually to $2.04. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Sysco Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Sysco has seen EPS rising for the last five years, at 6.4% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Sysco's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Sysco that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.