Alternatives: More Traditional Food Distributors
The alternative to United Natural Foods would be to invest in a traditional food distributor like SYSCO Corporation (NYSE:SYY). Sysco is one of the largest food distributors in the world, primarily serving the restaurant industry. The company distributes a variety of food products to about 400,000 customers in the U.S. and Canada. The restaurant industry is particularly susceptible to economic conditions, so SYSCO Corporation (NYSE:SYY)’s earnings are expected to grow at a nice 10% rate going forward. Sysco’s P/E of over 20 times TTM earnings seems a bit high, as I view the company’s growth potential a lot less favorably than United Natural Foods, Inc. (NASDAQ:UNFI), simply because Sysco has a lot less room to grow. On the positive side, SYSCO Corporation (NYSE:SYY) has an “A” credit rating from S&P, and pays a 3.2% dividend yield, which income-seeking investors are sure to like.
If you have limited risk tolerance and want income, buy Sysco. On the other hand, if you have an investment time frame of 10 years or more and are willing to accept a little more risk in exchange for higher potential, United Natural Foods, Inc. (NASDAQ:UNFI) could pay off tremendously, especially if the “health food” trend continues.
The article The Health-Food Trend Could Be Healthy For Your Portfolio, Too originally appeared on Fool.com and is written by Matthew Frankel.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Sysco and Whole Foods Market. The Motley Fool owns shares of Whole Foods Market. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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