Comparing Costco Wholesale (NASDAQ:COST) and Sysco (NYSE:SYY)

Sysco (NYSE:SYY) and Costco Wholesale (NASDAQ:COST) are both large-cap consumer staples companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, risk, earnings, analyst recommendations, institutional ownership and valuation.

Dividends

Sysco pays an annual dividend of $2.20 per share and has a dividend yield of 2.6%. Costco Wholesale pays an annual dividend of $5.88 per share and has a dividend yield of 0.6%. Sysco pays out 60.1% of its earnings in the form of a dividend. Costco Wholesale pays out 29.6% 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 raised its dividend for 57 consecutive years and Costco Wholesale has raised its dividend for 22 consecutive years. Sysco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Sysco and Costco Wholesale, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sysco	1	6	9	0	2.50
Costco Wholesale	1	11	22	0	2.62

Sysco presently has a consensus target price of $89.50, indicating a potential upside of 6.35%. Costco Wholesale has a consensus target price of $1,059.53, indicating a potential upside of 9.82%. Given Costco Wholesale’s stronger consensus rating and higher possible upside, analysts plainly believe Costco Wholesale is more favorable than Sysco.

Volatility and Risk

Sysco has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500. Comparatively, Costco Wholesale has a beta of 0.87, suggesting that its share price is 13% less volatile than the S&P 500.

Valuation and Earnings

This table compares Sysco and Costco Wholesale”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sysco	$84.55 billion	0.48	$1.76 billion	$3.66	22.99
Costco Wholesale	$275.24 billion	1.55	$8.10 billion	$19.88	48.53

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

Institutional & Insider Ownership

83.4% of Sysco shares are held by institutional investors. Comparatively, 68.5% of Costco Wholesale shares are held by institutional investors. 0.6% of Sysco shares are held by company insiders. Comparatively, 0.1% of Costco Wholesale shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Sysco and Costco Wholesale’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%
Costco Wholesale	3.01%	28.04%	10.63%

Summary

Costco Wholesale beats Sysco on 12 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 Costco Wholesale

Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories. It offers merchandise, such as sundries, dry groceries, candies, coolers, freezers, deli, liquor, and tobacco; appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products, postages, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosks, and jewelry; and meat, produce, service deli, and bakery products. The company also operates gasoline, pharmacies, optical, food courts, hearing-aid centers, and tire installation centers; and offers business delivery, travel, grocery, and various other services online. It also operates e-commerce websites. The company was formerly known as Costco Companies, Inc. and changed its name to Costco Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.