Meet the High-Yield Dividend King Wall Street Is Sleeping on. Here's Why It's a Buy in August.

Though it's not foolproof investing wisdom, and it is stock-specific, there is something to the "boring is beautiful" thesis. It's one reason that so many income investors and risk-averse market participants embrace consumer staples stocks.

The other side of the boring coin is that mundane doesn't captivate hearts, minds, and investor capital when growth stocks are in vogue, and that's very much the case these days. Many market participants are chasing tech stocks and pondering what's next in the world of artificial intelligence (AI).

Sysco is a Dividend King and worthy of that royal designation. Image source: Getty Images

Those trends don't necessarily mean that Wall Street is in the midst of another round of Dutch tulip mania, nor that a bubble will imminently burst, but investors' adulation for what they perceive as glitzy names helps explain how some defensive stocks can slip through the cracks, even when those companies are delivering solid showings. Such is life for Sysco (NYSE: SYY), the king of food distributors.

A tasty dividend idea

Considering that the stock is up 15% year to date and there's been ample talk of market-breadth widening, Sysco arguably isn't getting the respect it deserves. But to be fair, Wall Street isn't completely overlooking the stock: 15 analysts cover it.

That's a decent amount, but that crowd has been relatively quiet on Sysco of late. Still, the stock is a buy this month and for multiple reasons. One of the eye-catchers is Sysco's status as a Dividend King -- one of the few companies that has boosted its annual payouts for at least 50 consecutive years. To be precise, Sysco's dividend increase is at 58 years, a streak surpassed by just 17 other domestic companies.

This food stock's dividend yield is also part of the "buy now" case. At the current share price, the payout yields 2.6%, which isn't so high as to imply Sysco is a yield trap (it's not). Still, that yield is all the more meaningful at a time when the yield on the S&P 500 is barely above 1% and flirting with its all-time low. Given all that, it's not a stretch to say that Wall Street should be beating the drum on this defensive stock.

Another reason Sysco is worth considering in the near term is that the shares are rising in a tough environment for restaurant operators. When it reported its fiscal fourth-quarter results earlier this month, Sysco said its sales jumped 4.7%, and management noted that increased investments in selling programs are paying off at the local level. Investors should not overlook those points, as consumers are price-sensitive and restaurants are trying to navigate the impact of persistent inflation.

A trustworthy dividend

There are scores of dividend payers on the market, but not all are legitimate blue chip dividend stocks. Some may even morph into dividend offenders. Compounding that potential problem is the fact that several of the names that could eventually be dividend cutters or eliminators hail from the consumer staples sector.

Don't worry: Sysco isn't on that dubious list. The company is digesting (pun intended) its acquisition of Jetro Restaurant Depot, which could send its leverage to 6.4 times earnings before interest, taxes, depreciation, and amortization (EBITDA) next year. However, it expects to bring that leverage ratio down to 4 by fiscal 2030. Plus, the Jetro purchase adds $16 billion in annual sales to its top line.

Importantly, Sysco has the capacity to continue growing its payout, perhaps by as much as 6% annually. If that level of dividend growth is realized, it implies the stock will be an above-average inflation fighter. With inflation elevated today, Sysco's inflation-fighting chops make this long-term stock all the more appealing over the near term.

For investors approaching this stock with a long-term perspective, as they should, it's estimated that Sysco could return as much as $23 billion to shareholders through dividends and stock buybacks over the next decade, assuming it doesn't pursue another large acquisition. That's eating good in the investing neighborhood.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sysco. The Motley Fool has a disclosure policy.