Dividend investing is a tried-and-true strategy for generating strong, steady returns in economies both good and bad. But as corporate America's slew of dividend cuts and suspensions over the past few years has demonstrated, it's not enough simply to buy a high yield. You also need to make sure those payouts are sustainable.

Let's examine how Sysco (NYSE: SYY) stacks up. In this series, we consider four critical factors investors should examine in every dividend stock. We'll then tie it all together to look at whether Sysco is a dividend dynamo or a disaster in the making.

1. Yield
First and foremost, dividend investors like a large forward yield. But if a yield gets too high, it may reflect investors' doubts about the payout's sustainability. If investors had confidence in the stock, they'd be buying it, driving up the share price and shrinking the yield.

Sysco yields a healthy 3.6%, considerably higher than the S&P 500's 2.1%.

2. Payout ratio
The payout ratio might be the most important metric for judging dividend sustainability. It compares the amount of money a company paid out in dividends last year to the earnings it generated. A ratio that's too high -- say, greater than 80% of earnings -- indicates that the company may be stretching to make payouts it can't afford, even when its dividend yield doesn't seem particularly high.

Sysco has a moderate payout ratio of 52%.

3. Balance sheet
The best dividend payers have the financial fortitude to fund growth and respond to whatever the economy and competitors throw at them. The interest coverage ratio indicates whether a company is having trouble meeting its interest payments -- any ratio less than five is a warning sign. Meanwhile, the debt-to-equity ratio is a good measure of a company's total debt burden.

Although there aren't many other large, publicly traded food distributors to compare Sysco to, let's examine how Sysco stacks up next to some of its retail peers:

Company

Debt-to-Equity Ratio

Interest Coverage

Sysco 56% 17 times
Safeway 110% 4 times
Kroger 157% 5 times
Costco Wholesale 18% 21 times

Source: S&P Capital IQ.

Food distribution and retail are somewhat capital-intensive, but it's also a fairly stable business, and these companies -- especially Sysco and Costco -- have manageable debt burdens.

4. Growth
A large dividend is nice; a large growing dividend is even better. To support a growing dividend, we also want to see earnings growth.

Company

5-Year Annual Earnings-per-Share Growth

5-Year Annual Dividend-per-Share Growth

Sysco 7% 9%
Safeway (2%) 20%
Kroger 7% 17%
Costco Wholesale 4% 13%

Source: S&P Capital IQ.

The Foolish bottom line
Sysco appears to be a dividend dynamo. It has a nice yield, a moderate payout ratio, easily manageable debt, and decent growth to boot. If you're looking for some other great dividend stocks, I suggest you check out "Secure Your Future With 11 Rock-Solid Dividend Stocks," a special report from the Motley Fool about some serious dividend dynamos. I invite you to grab a free copy to discover everything you need to know about these 11 generous dividend payers -- simply click here.

Ilan Moscovitz doesn't own shares of any company mentioned. You can follow him on Twitter @TMFDada. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale and Sysco. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.