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Even if you don't realize it, you probably eat a lot of food from
Sysco(SYY - Get Report). The firm is the standard bearer in the food service distribution business, providing everything from ingredients to par-cooked entrees to services such as menu analysis to 400,000 restaurants, hotels and institutional dining facilities. Being the biggest foodservice distributor in North America comes with some distinct advantages for Sysco.
For starters, big scale means that the firm can boast a more svelte supply chain than its smaller peers. In an environment where rising input costs are every food firm's biggest concern (and one of the tailwinds helping Deere's sales), that increased efficiency helps SYY churn out respectable margins. From a food service standpoint, it makes sense to turn to a supplier like Sysco; after all, the firm can take many of the costs and food safety concerns off of a restaurateur's plate, helping profitbility down the line as well.
Historically, Sysco's growth has come through acquisitions, an approach that's worked well, but ramped up the amount of leverage on the firm's balance sheet. That said, debt obligations aren't out of whack by any stretch, and Sysco has plenty of wherewithal left over to increase its already sizable dividend payout.
Right now, SYY pays out a quarterly 27-cent payout, for a 3.5% yield. I'd expect to see that number increase in the next quarter.
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