In This Article:
It looks like Sysco Corporation (NYSE:SYY) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Sysco investors that purchase the stock on or after the 5th of October will not receive the dividend, which will be paid on the 27th of October.
The company's upcoming dividend is US$0.50 a share, following on from the last 12 months, when the company distributed a total of US$2.00 per share to shareholders. Calculating the last year's worth of payments shows that Sysco has a trailing yield of 3.0% on the current share price of $66.05. If you buy this business for its dividend, you should have an idea of whether Sysco's dividend is reliable and sustainable. So we need to investigate whether Sysco can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Sysco
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Sysco paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Sysco earnings per share are up 5.1% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.