YUM! Brands (YUM) is one of the world's largest fast food restaurant companies, which develops, operates and franchises the licensed brands Taco Bell, KFC, Pizza Hut and WingStreet worldwide, notes dividend reinvestment expert Vita Nelson, editor of DirectInvesting.
It operates approximately 43,500 restaurants in 135 countries and territories. With a history of consistent revenues and earnings growth, it is considered a solid and well diversified business with wide economic moat and sustainable competitive advantage over rivals, which also enjoys a solid corporate culture.
Consensus estimates call for the company to earn about $2.72 per share the current year, and to go to net about $3.13 next year.
YUM! Brands Inc. has increased its payments for 12 consecutive years. During the past five years it has increased its dividends at an average rate of 10.2%, and its quarterly payment of $0.30 currently provides a yield of 2.70%.
The stock highlights the value of dividends reinvestment; a hypothetical investment in YUM! Brands has grown cumulatively (including dividends reinvested) by 1,424.20% since September 1997.
However, if you remove dividend reinvestment from the equation, the same hypothetical investment would have grown only 1,080.14% during the same period of time.
The stock exhibits a healthy Dividend Payout Ratio of 46%, which means the company is paying out 46% of all its net income in dividends, and is retaining a large percentage of earnings to reinvest or grow the business.
Its Price to Earnings ratio of 25.8 is slightly below its industry average, making it attractive for investors with a long-term investment horizon.
Technically, YUM also looks attractive, trading 7.2% below its all-time high, while it is forming a long price consolidation pattern between $46 and $69, in which $46.40 is acting as a strong technical support level.
