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SYSCO Corporation (SYY), Genuine Parts Company (GPC): Distribution Masters

Despite a dip during the recession, the company’s top and bottom lines have headed generally higher over the past decade. Its dividend has been increased annually for well more than 10 years. The shares have run up of late and now yield around 2.5%, so now isn’t the time to jump aboard for income investors.

Growth investors, however, might want to take a look. This nation’s car fleet is a bit long in the tooth and will likely lead to increased auto repair spending. Since half of the company’s business comes from that sector, Genuine Parts Company (NYSE:GPC) looks set to benefit. Its other three businesses should improve along with the economy. Income investors should wait for a pullback and a yield in the 3% to 4% range.

Meds

Another distribution giant is Cardinal Health Inc (NYSE:CAH). The company is a middle man in the drug and medical supplies market, serving some 60,000 pharmacies, hospitals, and physicians’ offices. The two big events at the company lately were the loss of a key customer and an acquisition that moves the company into the home delivery market.

These two events are related. After losing the customer, management realized it needed to branch out to make up for the lost business. With a notable distribution system in place already, adding home delivery was a logical fit. It also moves the company toward what is likely to be a more common theme in the health care industry—keeping patients out of medical facilities. This shift should be a key growth driver.

The top and bottom line should be a little volatile over the next year or so, which isn’t surprising based on the two events above. However, the dividend has been increased annually for more than a decade. Although the stock only yields about 2%, that’s actually not a bad valuation for this company. Indeed, the shares have been stuck in neutral for about five years. Growth minded investors might want to take a look.

Stuck in the Middle

Being the middle man is grunt work and nobody gives you accolades for doing it well. That said, Genuine Parts Company (NYSE:GPC), SYSCO Corporation (NYSE:SYY), and Cardinal Health Inc (NYSE:CAH) have all built major businesses on this very strength. And they look like they have years of growth ahead. All are worth watching, with SYSCO Corporation (NYSE:SYY) and Cardinal Health Inc (NYSE:CAH) both at reasonably attractive levels right now.


Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Sysco.
Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Distribution Masters originally appeared on Fool.com is written by Reuben Brewer.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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