Yum! Brands (YUM) Rewards Investors With 12% Dividend Hike

Yum! Brands Inc. (NYSE:YUM) announced a 12% increase in its quarterly dividend to 47 cents per share. The raised dividend will be paid out on Mar 6, 2020 to its shareholders of record as of Feb 14. Notably, the dividend yield, based on the new payout and the last closing price, is approximately 1.8%.

On Feb 13, 2019, Yum Brands increased its dividend by 17% from 36 cents to 42 cents. The company’s steady dividend payout history is likely to make it an attractive investment choice for value investors or those seeking a stable stream of investment income.

Consistent dividend hikes highlight the company's financial stability and ability to sustain profits. Its attempt to enhance long-term shareholders' value, even in a volatile economic environment, is appreciable.

Rationale Behind the Dividend Hike

Yum! Brands’ strategic transformation plan to drive growth, efforts to boost the domestic business through various digital initiatives and refranchising efforts bode well.

The company aims to revamp its financial profile, and thereby improve the efficiency of its organization and cost structure globally. It believes that a “slimmer Yum Brands” would lead to efficiency gains.

In addition, the company aims to maintain an optimized capital structure, with the leverage of five times EBITDA. Over the next three years, it is committed to returning additional $6.5-$7 billion to shareholders through share repurchases and dividend payouts. Resultantly, it expects EPS to be at least $3.75 in the fourth quarter of 2019.

Furthermore, Yum! Brands’ efforts to boost its three iconic global brands and create more efficient cost structure are quite encouraging. Shares of the company have gained 13.4% in the past year compared with the industry’s 18.9% growth.

Zacks Rank & Key Picks

Yum! Brands currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks from the same space include Chuy's Holdings, Inc. (NASDAQ:CHUY) , Denny's Corporation (NASDAQ:DENN) and Chipotle Mexican Grill, Inc. (NYSE:CMG) . While Chuy’s and Denny’s sport a Zacks Rank #1 (Strong Buy), Chipotle carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chuy’s, Denny’s and Chipotle have impressive long-term earnings growth rate of 17.5%, 9% and 19.7%, respectively.

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