When looking for dividend stocks, the aim is typically to find companies that offer not just a decent yield today, but also the financial strength to maintain and grow that payout over time. A high yield can be tempting, but it is often a trap if the underlying company is struggling. The strategy behind the "Best Dividend Stocks" screen is to filter for exactly this balance: it prioritizes a strong ChartMill Dividend Rating (7 or higher) to ensure a solid payout profile, while also requiring minimum ChartMill Profitability and Health Ratings of 5 to filter out the companies that are burning cash or carrying too much debt. This approach does not just look for the highest yield; it looks for sustainable dividends backed by solid business fundamentals.
SYSCO CORP (NYSE:SYY) is a prime example of a stock that passes this screen and warrants a closer look for income-focused investors. As the largest foodservice distributor in North America, Sysco’s business model is built on essential demand from restaurants, hospitals, and schools, creating a relatively stable revenue stream that can support a consistent dividend policy.
Dividend Strength: A Key Pillar
Sysco’s fundamental report ([link to fa-report-link]) gives it a ChartMill Dividend Rating of 7 out of 10, which is what puts it squarely in the screener's selection. This score is built on several reassuring factors:
- Attractive Yield: SYY currently offers a dividend yield of 2.72%. This is not just a headline number; it significantly outperforms both its industry average (0.76%) and the broader S&P 500 average (1.78%). For an investor seeking income, this is a meaningful differentiator.
- Reliable History: The company has a long and consistent track record, having paid a dividend for at least 10 years. The report also notes that Sysco has not decreased its dividend in the last three years, which is crucial for investors who rely on a steady income stream.
- Sustainable Growth: While the annual dividend growth rate is moderate at 4.23%, the real key is the payout ratio. At 59.10%, Sysco is using a responsible portion of its earnings to fund the dividend. The report states that its earnings are growing faster than its dividend, which gives confidence that the current payout is not only sustainable but has room for future increases.
The Foundation: Profitability and Health
A great dividend rating is only safe if the company is fundamentally sound. This is where the screen's additional filters (Profitability and Health Ratings of 5 or higher) are critical. Sysco’s Profitability Rating of 7 shows it is a well-oiled machine:
- Industry-Leading Returns: The company’s Return on Equity (ROE) of 75.58% and Return on Invested Capital (ROIC) of 15.13% are not just good—they beat over 90% of its peers in the Consumer Staples Distribution & Retail industry. High returns like these suggest a business that can generate cash efficiently, which is the ultimate source of dividend payments.
- Positive Cash Flow: The report confirms Sysco has maintained positive operating cash flow for years, which is the lifeblood for any dividend.
The Health Rating of 5 is more neutral, but not a red flag for dividend investors. While the company carries a significant amount of debt (Debt/Equity of 5.58), this is common in the distribution industry, which relies on large warehouses and logistics fleets. The crucial counterpoint is the Altman-Z Score of 5.16, which indicates a very low risk of bankruptcy. This score reassures investors that the debt is manageable and the dividend is not at immediate risk.
Growth: The Engine for Future Dividends
For a dividend to grow, a company needs to grow its earnings. Sysco’s Growth Rating of 4 is lower than its profitability peers, but it still offers a solid base. The company has grown its Earnings Per Share (EPS) by an average of 17.52% annually over the past years, and analysts expect EPS to continue growing at 7.01% per year going forward. While this growth rate is decelerating from the recent past, it is still a positive trend that supports the argument for gradual dividend increases.
The Bigger Picture
Sysco may not be a high-growth rocket ship, but for dividend investors it looks like a reliable income engine. It combines an above-average yield with a strong profitability backdrop and a manageable debt profile. The stock’s long history of steady payouts makes it a classic candidate for a "buy and hold" income portfolio.
Want to find more stocks with this profile? The screen we used to find Sysco is just the starting point. You can run it yourself and explore many other candidates that combine strong dividend ratings with decent profitability and health.
Click here to run the Best Dividend Stocks Screen and start your own search.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. All investments carry risk. Please conduct your own research or consult with a qualified financial advisor before making any investment decisions.
Read full article here »
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Sysco Corp (NYSE:SYY) Offers a Balanced Blend of Dividend Yield and Financial Strength
When looking for dividend stocks, the aim is typically to find companies that offer not just a decent yield today, but also the financial strength to maintain and grow that payout over time. A high yield can be tempting, but it is often a trap if the underlying company is struggling. The strategy behind the "Best Dividend Stocks" screen is to filter for exactly this balance: it prioritizes a strong ChartMill Dividend Rating (7 or higher) to ensure a solid payout profile, while also requiring minimum ChartMill Profitability and Health Ratings of 5 to filter out the companies that are burning cash or carrying too much debt. This approach does not just look for the highest yield; it looks for sustainable dividends backed by solid business fundamentals.
SYSCO CORP (NYSE:SYY) is a prime example of a stock that passes this screen and warrants a closer look for income-focused investors. As the largest foodservice distributor in North America, Sysco’s business model is built on essential demand from restaurants, hospitals, and schools, creating a relatively stable revenue stream that can support a consistent dividend policy.
Dividend Strength: A Key Pillar
Sysco’s fundamental report ([link to fa-report-link]) gives it a ChartMill Dividend Rating of 7 out of 10, which is what puts it squarely in the screener's selection. This score is built on several reassuring factors:
The Foundation: Profitability and Health
A great dividend rating is only safe if the company is fundamentally sound. This is where the screen's additional filters (Profitability and Health Ratings of 5 or higher) are critical. Sysco’s Profitability Rating of 7 shows it is a well-oiled machine:
The Health Rating of 5 is more neutral, but not a red flag for dividend investors. While the company carries a significant amount of debt (Debt/Equity of 5.58), this is common in the distribution industry, which relies on large warehouses and logistics fleets. The crucial counterpoint is the Altman-Z Score of 5.16, which indicates a very low risk of bankruptcy. This score reassures investors that the debt is manageable and the dividend is not at immediate risk.
Growth: The Engine for Future Dividends
For a dividend to grow, a company needs to grow its earnings. Sysco’s Growth Rating of 4 is lower than its profitability peers, but it still offers a solid base. The company has grown its Earnings Per Share (EPS) by an average of 17.52% annually over the past years, and analysts expect EPS to continue growing at 7.01% per year going forward. While this growth rate is decelerating from the recent past, it is still a positive trend that supports the argument for gradual dividend increases.
The Bigger Picture
Sysco may not be a high-growth rocket ship, but for dividend investors it looks like a reliable income engine. It combines an above-average yield with a strong profitability backdrop and a manageable debt profile. The stock’s long history of steady payouts makes it a classic candidate for a "buy and hold" income portfolio.
Want to find more stocks with this profile? The screen we used to find Sysco is just the starting point. You can run it yourself and explore many other candidates that combine strong dividend ratings with decent profitability and health.
Click here to run the Best Dividend Stocks Screen and start your own search.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. All investments carry risk. Please conduct your own research or consult with a qualified financial advisor before making any investment decisions.
Read full article here »