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Important news for shareholders and potential investors in YUM! Brands, Inc. (NYSE:YUM): The dividend payment of US$0.42 per share will be distributed to shareholders on 08 March 2019, and the stock will begin trading ex-dividend at an earlier date, 13 February 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine YUM! Brands’s latest financial data to analyse its dividend characteristics.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does YUM! Brands fit our criteria?
The company currently pays out 29% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 40% which, assuming the share price stays the same, leads to a dividend yield of 1.8%. However, EPS is forecasted to fall to $4.01 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, YUM! Brands has a yield of 1.8%, which is on the low-side for Hospitality stocks.
Considering the dividend attributes we analyzed above, YUM! Brands is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for YUM’s future growth? Take a look at our free research report of analyst consensus for YUM’s outlook.
- Valuation: What is YUM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether YUM is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.