Yum Nears New High After Long Consolidation


An analyst upgrade Thursday lifted shares ofYum Brands ( YUM ) just above a 77.43 buy point from a double-bottom base. The onetime highflier has seen growth slow in recent years, but it offers a decent dividend.

The stock gapped up Thursday in above-average volume.

The operator of KFC, Taco Bell and Pizza Hut gets half its revenue from China. The stock has been hurt some in the past by reports of bird flu. CEO David Novak said last month that avian flu has not had a meaningful impact on sales in China, but that there was a softening of demand for KFC chicken in regions with significant bird flu cases.

An analyst at Robert W. Baird & Co. upgraded the stock Thursday to outperform from neutral, raising the price target to 87 from 79.

The stock has been rallying since Feb. 4 after the company reported better-than-expected earnings. After three quarters of declining earnings and sales, EPS rose 4% to 86 cents a share. Analysts were forecasting 80 cents. Sales were up 1%. Same-store sales in China fell 4% during the quarter, but operating profit in the region rose 5%.

Analysts are expecting a 20% earnings increase in the current quarter.

Yum has a five-year annualized growth rate of 11%. Analysts forecast a 22% earnings increase in 2014 and a 15% increase in 2015.

The Earnings Stability Factor is a favorable 5 on a 0 to 99 scale, where low numbers correspond to stable earnings growth.

The return on equity is 63% and pretax profit margin is 15%.

Yum offers a quarterly dividend of 37 cents a share, which works out to a 2% yield on an annualized basis.

The company has been offering a regular quarterly dividend since 2004. It started out as 10 cents a share.

It has a three- to five-year dividend growth rate of 15%.

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

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: YUM

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