Yum Brands Inc's Dividend Analysis
Delving into the Dividend Dynamics of Yum Brands Inc
Yum Brands Inc (NYSE:YUM) recently announced a dividend of $0.67 per share, payable on 2024-03-08, with the ex-dividend date set for 2024-02-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Yum Brands Inc's dividend performance and assess its sustainability.
What Does Yum Brands Inc Do?
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Yum Brands is a U.S.-based restaurant operator featuring a portfolio of four brands: KFC (29,900 global units at year-end 2023), Pizza Hut (19,866 units), Taco Bell (8,564 units), and The Habit Burger Grill (381 units). With $64 billion in 2023 systemwide sales, the firm is the second-largest restaurant company in the world behind McDonald's ($130 billion), ahead of Restaurant Brands International and Starbucks ($29 billion). Yum is 98% franchised, with the largest franchisee, Yum China, spun out in 2016 (after which Yum China agreed to pay 3% royalties to Yum Brands in perpetuity). Yum is the newest evolution of Tricon, formerly a division of PepsiCo, and generates the bulk of its revenue from franchise royalties and marketing contributions.
A Glimpse at Yum Brands Inc's Dividend History
Yum Brands Inc has maintained a consistent dividend payment record since 2004. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Yum Brands Inc's Dividend Yield and Growth
As of today, Yum Brands Inc currently has a 12-month trailing dividend yield of 1.80% and a 12-month forward dividend yield of 1.99%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Yum Brands Inc's annual dividend growth rate was 8.80%. Extended to a five-year horizon, this rate increased to 10.80% per year. And over the past decade, Yum Brands Inc's annual dividends per share growth rate stands at 4.90%.
Based on Yum Brands Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Yum Brands Inc stock as of today is approximately 3.01%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Yum Brands Inc's dividend payout ratio is 0.47.
Yum Brands Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Yum Brands Inc's profitability 9 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Yum Brands Inc's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Yum Brands Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Yum Brands Inc's revenue has increased by approximately 10.50% per year on average, a rate that outperforms approximately 75.77% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Yum Brands Inc's earnings increased by approximately 12.60% per year on average, a rate that outperforms approximately 58.33% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 10.10%, which outperforms approximately 66.36% of global competitors.
Next Steps
With Yum Brands Inc's solid dividend history, above-average growth rates, and a sustainable payout ratio, the company remains an attractive prospect for value investors interested in steady income streams. The strong profitability and growth metrics further bolster confidence in the company's ability to maintain and potentially increase its dividend payouts. Investors considering adding Yum Brands Inc to their portfolios for its dividend qualities should also consider the broader industry trends and the company's strategic positioning within the competitive landscape. Will Yum Brands Inc continue to thrive and reward its shareholders with growing dividends, or are there challenges ahead that might affect its generous dividend policy? This question remains central to the investment thesis around Yum Brands Inc.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
