Last Updated on June 5, 2020 by Dividend Power

In this article, I examine Sysco Corporation (SYY), whose Dividend King status may not be safe due to the impact of the coronavirus. I like Dividend Kings with 50+ years of dividend increases. Their status as dividend growth stocks is largely proven. Most do not drop off the list except due to mergers or acquisitions, such as Vectren and Connecticut Water Service. Other such as Winn-Dixie (WINN) dropped off the list due to loss of market share and leverage. Yet others just such as Diebold (OTCPK:DBD) had years of inconsistent operating results, which led to a freeze in the dividend.

But the possibility exists that ‘Black Swan’ events could place a dividend at risk. Well we are in the midst of a ‘Black Swan’ event now. Sysco raised the regular dividend for fiscal 2020 and entered the Dividend King club. But the effect of coronavirus, oil price wars, and transportation restrictions will seemingly have an outsize effect on the company. Many restaurants, hotels, schools, colleges, etc. are closed. These are customers of Sysco. The market has largely recognized the risks to the top and bottom lines. The stock price collapsed to a 52-week low of $26.00 per share, which was a whopping 70% decline from the 52-week high at the end of 2019. The stock price has recovered and is trading near $40 per share as of this writing. The dividend yield is about 4.5% so it is decent. However, I am largely negative on the stock at this point. I think that fiscal 2020 and fiscal 2021 will be challenging ones for Sysco. Further, I am concerned that the Sysco’s Dividend King status may not be safe.

Overview of Sysco

Sysco was founded in 1969. The company is one of the largest food and related item distributors in the world. The company has operations in the U.S., Canada, UK, France, and other locations. Customers are primarily the food service industry including restaurants, hospitals and nursing homes, schools and colleges, hotels and motels, industrial caterers, etc. Sysco operates in three business segments: U.S. Foodservice Operations, International Foodservice Operations, and SYGMA…

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