Yet Another Dividend Hike at Yum! - Analyst Blog


Ky.-based restaurateur Yum! Brands Inc. ( YUM ) recently announced its decision to hike its quarterly dividend by 10% to 37 cents from 33.5 cents paid previously. This equates to an annual payout of $1.48 per share. The increased dividend will be paid on Nov 1, 2013 to stockholders of record as of Oct 11. This represents the ninth successive annual increase in dividend by Yum! Brands since the initiation of the program in 2004 and brings the forward annual dividend yield to 2.03% as of Sep 19, 2013.

Yum! Brands, the owner of Pizza Hut, KFC and Taco Bell has a consistent record of paying quarterly dividends, supported by its cash position.  The current hike comes exactly after a year of its prior dividend hike (from 28.5 cents to 33.5 cents, which was paid on Nov 2, 2013). Prior to that, Yum! had increased its quarterly dividend by 14% in Sep 2011 and by 19% in Sep 2010.

Yum!'s dividend policy continues to target a payout ratio of 35-40% of its annual net income. Yum! is not the only company in the restaurant sector paying attractive dividends. Fast-food giant McDonald's Inc. ( MCD ) also announced a 5% hike in its dividend to 81 cents, a day before Yum!. Another restaurant company, Brinker International Inc. ( EAT ) raised its quarterly dividend by 20% to 24 cents per share in August end. Yet another eatery, Frisch's Restaurants Inc. ( FRS ), increased its quarterly dividend by 12.5% in early September.

Yum! Brands, the world's largest restaurant company in terms of system restaurants, with more than 38,000 units in over 120 countries, ended the second quarter of 2013 with a cash balance of $500.0 million. We believe the company has enough monetary resources to provide optimum shareholder value.

We appreciate Yum! Brands' concerted efforts to consistently boost long-term shareholder and franchisee value irrespective of the economic peaks and valleys. We believe that this commitment affirms the company's optimistic outlook and ensures strong growth.

The company also has a share repurchase program in place. Since 2004, the company's dividend and share repurchase programs have boosted shareholder return by more than 3.0 billion and $8.0 billion, respectively as of Jun 15, 2013.

Yum! Brands has one of the highest returns on invested capital in the Quick Service Restaurants industry. Each annual increase in dividend has been at a double-digit percentage rate. Yum! holds a Zacks Rank #3 (Hold).

BRINKER INTL (EAT): Free Stock Analysis Report


MCDONALDS CORP (MCD): Free Stock Analysis Report

YUM! BRANDS INC (YUM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: EAT , FRS , MCD , YUM

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