Tuesday, December 7, 2010

Yum's Yield Is Inching Upward

YUM! Brands is the world’s largest restaurant company. According to the company website, YUM! has over 36,000 restaurants in 110 different countries. YUM! owns the KFC, Taco Bell, and Pizza Hut, Long John Silver’s, and A&W franchises. The company has seen its domestic growth slowdown dramatically over the past few years. To address this problem, the company has been aggressively expanding into international markets over the past decade.

The company is on pace to earn over $11 billion dollars this year. Sales are increasing over last year's $10.8 billion dollar figure in 2009. The company's long term debt burden has increased to $3.6 billion dollars. YUM! has generated $1.77 billion in free cash flow. This is enough of a cushion to keep the company’s dividend safe since the current payout is just 35%.
YUM!'s chief competition is McDonald’s Burger King, and Wendy’s for the fast food dollar. YUM! is the second largest company in the fast food industry. The company's operating margins and gross margins are higher than most competitors. The company’s return on equity is the best of every major fast food franchise.

YUM!’s shares currently trade just south of $50 per share. YUM! has been able to grow earnings at a 14% clip over the past five years. The stock trades at 20 times earnings which is actually below the industry average. YUM! is currently yielding over 2% which puts it in fair dividend territory..

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