Sysco's (NYSE:SYY) Dividend Outlook Appears Stable, Slow Growth Ahead

As Sysco (NYSE:SYY) slowly moves ahead with their transformation strategy, a key to look for in their performance is how the company handles the dividend.

Barclays says, "The company's business transformation initiative, that began last year, is moving ahead steadily and continues to put meaningful pressure on earnings...Free cash flow, after capex and required payments to the IRS to reduce deferred taxes, is just about equal to the company's dividend in fiscal 2011 and fiscal 2012. Nevertheless, SYY recently increased it slightly, and we believe a small increase is also possible for FY12. The dividend seems to be the key to the stock's performance, and as long as SYY's dividend policy remains steady, we think the stock has little downside risk. For this reason, we are increasing our price target to $29, which is 14.5x our calendarized FY11 EPS of $2.03, as we believe the dividend outlook remains stable."

Barclays reiterates an "Equalweight" rating on Sysco (SYY), which closed Thursday at $29.97, up $0.01, or 0.03 percent. Barclays has a price target of $29 on Sysco, raising it from $27.