Sysco Corporation Dividend Capture

Dec.28.11 | About: SYSCO Corporation (SYY)

Sysco Corporation (NYSE:SYY)

Yield: 3.66%

Dividend Amount: $0.27

Ex-Dividend Date: January 04, 2012

Beta: 0.71

Sysco Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily to the food-service or food-away-from-home industry. The company was founded in 1969 and is headquartered in Houston, Texas.

Sysco is in the retail industry even though they are whole-sellers and I used to do business with Sysco. My personal experience was very positive and when I ask, other operators tell me they are still great to work with.

Click here to read my other Sysco-related articles.

In this article we will go over an upcoming dividend with Sysco that I may capture with a minimum amount of risk. The criteria that I use is that I must be able to sell a call option in either the front or first back month that is in the money, and with enough premium that I will not mind getting exercised early (which happens often and can be a good thing if the trades are executed correctly).


In combination with my buying Sysco stock and after checking company updates, offer to sell the January $29.00 strike call for $0.25 over the intrinsic value. The option may get exercised early for a gain. In almost all cases I will sell the call option first to ensure the stock option leg is complete first. If not, after qualifying for the dividend, I will attempt to close out the trade with a gain of near $0.07.

The current trailing twelve months (TTM) P/E ratio is 15.1. The forward P/E ratio is 14.9. The current book value per share is 7.92.

For the same fiscal period year-over-year, revenue has improved to $39.32 billion for 2011 vs. $37.24 billion for 2010. The bottom line has falling earnings year-over-year of $1.15 billion for 2011 vs. $1.18 billion for 2010. The company's earnings before interest and taxes are falling with an EBIT year-over-year of $1.93 billion for 2011 vs. $1.98 billion for 2010.

At $29.30, the price is currently above the 200-day moving average of 28.83 and above the 60-day moving average of 27.72.

Looking at the price movement over the last month, the stock has moved higher in price 6.12%, and changing from last year at this time 1.48%.

When comparing to the S&P 500, the year to date difference is -0.31%.

Click to enlarge

Remember, you must buy a stock at least three business days before the record date (at least one business day before the ex-dividend date) to qualify for a dividend.

My last step (completed before making a trade on the same day) is to check company announcements and news sources for possible events that may cause the stock price to move. This is especially important during earnings season.

I research the different call options and calculate the expected probabilities based on Beta, Bid, Offer, Volume traded the current day, open interest, and time value / implied volatility. The options offer some level of protection from down moves in the stock, and provide revenue to cover the times that the options do not fully cover down moves in the stock. Income is not needed from the option premiums, so a break even from premiums received/stock losses ratio is a win.

I use a proprietary blend of technical analysis, financial crowd behavior and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. Nothing in the article should be considered investment advice, but you may want to use this article as a starting point of your own research with your financial planner.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SYY over the next 72 hours.