Yum! Brands Inc.
) 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.
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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
) also announced a 5% hike in its dividend to 81 cents, a day
before Yum!. Another restaurant company,
Brinker International Inc.
) raised its quarterly dividend by 20% to 24 cents per share in
August end. Yet another eatery,
Frisch's Restaurants Inc.
), 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
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).