Sysco (NYSE:SYY) versus Dollar General (NYSE:DG) Critical Analysis

Sysco (NYSE:SYY) and Dollar General (NYSE:DG) are both large-cap consumer staples companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, risk, earnings, institutional ownership, dividends, valuation and profitability.

Risk & Volatility

Sysco has a beta of 0.64, indicating that its share price is 36% less volatile than the S&P 500. Comparatively, Dollar General has a beta of 0.23, indicating that its share price is 77% less volatile than the S&P 500.

Profitability

This table compares Sysco and Dollar General’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sysco	2.08%	95.05%	8.00%
Dollar General	3.90%	18.93%	5.21%

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Sysco and Dollar General, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sysco	1	6	9	0	2.50
Dollar General	1	16	12	0	2.38

Sysco currently has a consensus target price of $90.17, suggesting a potential upside of 16.68%. Dollar General has a consensus target price of $137.96, suggesting a potential upside of 12.32%. Given Sysco’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Sysco is more favorable than Dollar General.

Valuation & Earnings

This table compares Sysco and Dollar General”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sysco	$84.55 billion	0.45	$1.76 billion	$3.66	21.11
Dollar General	$42.72 billion	0.63	$1.51 billion	$7.69	15.97

Sysco has higher revenue and earnings than Dollar General. Dollar General is trading at a lower price-to-earnings ratio than Sysco, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

83.4% of Sysco shares are held by institutional investors. Comparatively, 91.8% of Dollar General shares are held by institutional investors. 0.6% of Sysco shares are held by insiders. Comparatively, 0.6% of Dollar General shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Dividends

Sysco pays an annual dividend of $2.20 per share and has a dividend yield of 2.8%. Dollar General pays an annual dividend of $2.36 per share and has a dividend yield of 1.9%. Sysco pays out 60.1% of its earnings in the form of a dividend. Dollar General pays out 30.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Sysco has increased its dividend for 57 consecutive years. Sysco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Sysco beats Dollar General on 10 of the 17 factors compared between the two stocks.

About Sysco

Sysco Corporation, through its subsidiaries, engages in the marketing and distribution of various food and related products to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments. The company distributes frozen food, such as meat, seafood, fully prepared entrées, fruits, vegetables, and desserts; canned and dry food products; fresh meat and seafood products; dairy products; beverages; imported specialties; and fresh produce products. It also supplies various non-food items, including paper products comprising disposable napkins, plates, and cups; tableware consisting of glassware and silverware; cookware, such as pots, pans, and utensils; restaurant and kitchen equipment and supplies; and cleaning supplies. The company serves restaurants, hospitals and nursing facilities, schools and colleges, hotels and motels, industrial caterers, and other foodservice venues. Sysco Corporation was incorporated in 1969 and is headquartered in Houston, Texas.

About Dollar General

Dollar General Corporation, a discount retailer, provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. It offers consumable products, including paper and cleaning products, such as paper towels, bath tissues, paper dinnerware, trash and storage bags, disinfectants, and laundry products; packaged food comprising cereals, pasta, canned soups, fruits and vegetables, condiments, spices, sugar, and flour; and perishables that include milk, eggs, bread, refrigerated and frozen food, beer, and wine. The company's consumable products also comprise snacks, such as candies, cookies, crackers, salty snacks, and carbonated beverages; health and beauty products, including over-the-counter medicines and personal care products, such as soaps, body washes, shampoos, cosmetics, and dental hygiene and foot care products; pet supplies and pet food; and tobacco products. In addition, it offers seasonal products comprising holiday items, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, and automotive and home office supplies; and home products that include kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, and bed and bath soft goods. Further, the company provides apparel, which comprise basic items for infants, toddlers, girls, boys, women, and men, as well as socks, underwear, disposable diapers, shoes, and accessories. The company was formerly known as J.L. Turner & Son, Inc. and changed its name to Dollar General Corporation in 1968. Dollar General Corporation was founded in 1939 and is based in Goodlettsville, Tennessee.