China is a big deal toYum Brands International (
) as that's where it gets more than 40% of its sales and about
half of operating profit.
The operator of KFC, Pizza Hut and Taco Bell is now targeting
India as its next key market. India is the world's second most
populous market and its economy is expected to grow 6% this
fiscal year through June, per the World Bank. The estimate,
though, was lowered Oct. 10 from an earlier 6.9% projection.
The company recently said it would spend $100 million in the
next four to five years to expand its Indian operations. Yum
Brands is targeting 1,000 restaurants by 2015. It currently has
about 500, of which 101 were opened in 2011.
"India is at the same point China was before it took off, in
terms of macroeconomic parameters such as per capita income and
export as a percentage of GDP," Niren Chaudhary, president of Yum
India, told Business Week.
In Q1, Yum made India its own reporting segment. Quarterly
sales in India grew 29% to 34% in the past three quarters, but
still accounted for less than 1% of total revenue.
"We are laying the foundation for this business to have
leading brands in every significant category in India including
KFC, Pizza Casual Dining, Pizza Hut Home Service, and Taco Bell,"
said CEO David Novak in Yum's Q3 conference call. "We expect this
business to have a substantial impact on Yum's profit growth in
Yum Brands has posted higher earnings each year since its
founding as Tricon Global Restaurants in 1997. It has a
three-year earnings growth rate of 14%. Its three-year Earnings
Stability Factor is 1, signaling a rock-steady stream of
Analysts see profit rising 14% to $3.28 a share this year.
Besides stable growth, the restaurant giant rewards
shareholders with dividends. It currently pays $1.34 a share,
which works out to a yield of about 1.9%. Although its yield is
among the lowest for companies in the Retail-Restaurants groups,
Yum is one of the better-rated firms.
The company last boosted its payout in September by 18% -- the
eighth straight double-digit increase. Its dividend has more than
doubled in the past five years.
Yum Brands is building the right side of a cup base.