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Yum! Brands (YUM) Rewards Shareholders With 11% Dividend Hike

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Yum! Brands, Inc. (YUM - Free Report) recently announced a hike in its quarterly dividend payout. The company raised its quarterly dividend by 11%, which reflects its intention to utilize free cash to boost shareholders’ returns.

YUM increased its quarterly dividend to 67 cents per share (or $2.68 annually) from the previous payout of 60.5 cents (or $2.42 annually). The hiked dividend will be paid out on Mar 8, 2024, to shareholders on record at the close of Feb 21, 2024.

Based on the closing price of $129.44 per share on Jan 24, 2024, the stock has a dividend yield of 2.1%. YUM’s payout ratio is 46, with a five-year dividend growth rate of 9.3%.  Along with boosting shareholders’ returns, dividend hikes raise the market value of the stock. Companies often attract new investors and retain old ones through this strategy.

We appreciate Yum! Brands’ consistent efforts to enhance shareholders’ returns despite high inflation affecting most industries. These initiatives reflect the company’s business strength and the sustainability of its cash flows.

What’s Driving the Dividend Policy?

Despite the challenging macro environment, the company impressed investors with robust same-store sales growth in the third quarter of 2023. The company reported consolidated same-store sales growth of 6% year over year. A rise in dine-in traffic, digital initiatives and strategic third-party partnerships primarily backed the upside. During the quarter, same-store sales at Taco Bell, KFC and Pizza Hut rose 8%, 6% and 1% year over year, respectively.

The company has been benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, the company anticipates the momentum to continue in the upcoming periods.

The company — which shares space with Chipotle Mexican Grill, Inc. (CMG - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) and Dave & Buster's Entertainment, Inc. (PLAY - Free Report) in the Zacks Retail – Restaurants industry — has also implemented various digital features in mobile and online platforms across all brand segments to enhance the guest experience. The company is accelerating its delivery services and the results have been positive. In third-quarter 2023, it reported digital sales of more than $7 billion.

A Brief Review of the Other Stocks

Chipotle is benefiting from its digital efforts, Chipotlane add-ons and marketing initiatives. This, along with strength in digital sales, a rise in menu prices and new restaurant openings, have been driving the company. Also, a strong comparable restaurant sales growth bodes well. Going forward, it continues to focus on the stage gate process and leveraging digital programs to expand access and convenience. The company focuses on improving order accuracy and timing for its digital business.

Darden Restaurants is benefiting from strong off-premise offerings, menu innovation and digital initiatives. The focus on strategic acquisitions bodes well. In second-quarter fiscal 2024, off-premise sales contributed approximately 23% to total sales at Olive Garden and 14% at LongHorn. The company has been benefitting from technological enhancements with reference to online ordering. Going forward, the company intends to revamp its point-of-sale system to boost guest experience and manage off-premise offerings.

Dave & Buster's is benefiting from strategic initiatives, marketing and technology investments. Also, the emphasis on an optimized service model, expansion of entertainment options and new stores bode well. During the third quarter of fiscal 2023, the company opened two new Dave & Buster's stores and one new Main Event store. Following the openings, the company reported solid performances regarding the same. In fiscal 2023, the company expected to open 16 new stores (including 11 Dave & Buster's and 5 Main Event locations) and relocate Dave & Buster's Vernon Hills store.

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