Last update on 2024-06-27

Yum Brands (YUM) - Dividend Analysis (Final Score: 7/8)

Yum Brands' (YUM) dividend analysis achieves a score of 7/8, reflecting strong, stable returns over 20 years. Investors can expect reliable dividends and growth.

Short Analysis - Dividend Score: 7

We're running Yum Brands (YUM) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield reflects the rate of return to shareholders through dividends, presented as a percentage of the current stock price. A higher yield indicates a potentially high return. Comparing Yum Brands' yield to the industry average shows how competitive the firm's dividends are relative to its peers.

Yum Brands boasts a dividend yield of 1.8521%, which is notably superior to the industry average of 0.93%. Examining historical yields, YUM's dividends have generally remained higher or at least on par with the industry's, except during certain years like 2003 and 2011 when industry yields spiked. Over the last 20 years, YUM's ability to maintain a robust dividend yield indicates consistent returns to shareholders, bolstering investor confidence. Additionally, this yield compares favorably to the historical industry performance, portraying YUM as an attractive option for income-focused investors. However, a holistic view incorporating stock price appreciation and overall market conditions is necessary to quantify the actual benefits.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend Growth Rate

Dividend Per Share Ratio: {'year': {'values': ['2003', '2004', '2005', '2006', '2007', '2008', '2009', '2010', '2011', '2012', '2013', '2014', '2015', '2016', '2017', '2018', '2019', '2020', '2021', '2022', '2023']}, 'dividendPerShareRatio': {'values': [0, 0, 115.0209, 23.2242, 98.0999, 29.5146, 14.7077, 12.8223, 17.6088, 14.9715, 15.5465, 10.5514, 11.1828, 11.8359, -11.6799, 20, 16.6667, 11.9048, 6.383, 14, 6.1404]} Average Dividend Ratio: 20.881023809523803

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% in the last 20 years?

Interpreting Yum Brands' Payout Ratio over the past 20 years, we notice the average Payout Ratio stands at 30.47%. This is well below the critical threshold of 65%. Notably, while the Payout Ratio has shown volatility, peaking at 62.80% in 2020, it generally remained under 50%. Maintaining a Payout Ratio below 65% suggests sustainability; Yum Brands has retained ample earnings to reinvest in growth and safeguard against periods of financial adversity. In simpler terms, the company is neither overly generous in its dividend payouts nor risking its reinvestment potential, highlighting robust financial health. This bodes well for dividend sustainability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

The ratio of dividends per share covered by earnings per share for Yum Brands (YUM) has fluctuated over the years. A higher ratio indicates that the company is comfortably able to cover its dividend obligations with its earnings, which is generally a positive sign for dividend sustainability. Specifically, it is excellent when the coverage ratio is above 1, meaning that earnings are more than sufficient to cover dividend payments. Based on the provided data, from 2003 to 2023, this ratio has remained below 1, indicating Yum Brands' dividends are less than the earnings but not entirely covered in most years. This poses a moderate risk to the sustainability of its dividend payouts and might be considered less favorable by conservative investors.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow means ensuring a company's dividend payouts are sustainable. Companies should have enough free cash flow to cover dividends over time to avoid financial distress. This ratio is crucial for assessing dividend confidence.

Examining the data, Yum Brands consistently maintains free cash flow well in excess of its dividend payouts. With peaks and troughs, the dividend coverage ratio remains comfortably above critical thresholds. For instance, between 2003 to 2006, we see increased free cash flow alignment with dividends, signaling growth stability. Ratios in the range of 0.3 to over 0.6 for most years amply illustrate sustainable dividend practices. It’s noteworthy, however, that in years like 2014, the coverage exceeded advisable measures, hinting at a plateau or inefficiency. Recent years reconfirm solid payout planning with ratios stabilizing close to 0.5. Given financial dynamics and broader market conditions, YUM displays prudent fiscal management. This trend represents a good well-covered dividend scenario safeguarding investor interests.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividend payouts indicate the company's reliability and predictability, crucial for income investors.

Yum Brands (YUM) shows a concerning dip in 2017 when the dividend per share decreased to $1.2 from the previous year's $1.3587, representing a drop of approximately 11.67%. While this is less than a 20% drop, it signifies a rare interruption in an otherwise upward trend. Most years show a stable and growing dividend, increasing incrementally each year without major declines. With dividends increasing from $0 in 2003 to $2.42 in 2023, the overall trend is positive. This indicates Yum Brands' commitment to returning value to shareholders, albeit with notable caution needed due to the 2017 dip. This trend is generally good, reflecting positively on the company's financial health and reliability in providing stable dividends, but the 2017 dip should be considered as a potential, albeit minor, red flag.

Dividends Paid for Over 25 Years?

Evaluating a company's history of dividends paid over 25 years helps assess its stability, reliability, and commitment to returning value to shareholders. Companies with a long history of dividend payments are often seen as more dependable investments.

Based on the provided data, Yum Brands has been paying dividends consistently only since 2004. Their dividend payments have generally increased each year from $0.0719 per share in 2004 to $2.42 per share in 2023. While YUM has not paid dividends for the required 25-year period, its strong upward trend in dividend per share indicates a growing commitment to returning value to shareholders. Since the company began its dividend payments in 2004, they have raised dividends almost every year, suggesting financial robustness and a positive trend. However, it falls short on the criterion of a 25-year dividend history, which could be seen as a negative aspect if strict historical consistency is a priority for certain investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate the company's commitment to returning value to shareholders and can decrease the share count, potentially raising the value of remaining shares.

Yum Brands (YUM) has demonstrated reliable stock repurchases over the past 20 years, with years like 2005, 2006, 2007, 2008, 2009, and between 2011 and 2013, and from 2015 to 2023 experiencing significant buybacks. The company had over 610 million shares in 2003, but this number gradually decreased to 281 million in 2023. This consistent reduction in share count represents an average annual repurchase of approximately -3.7397%. Such a trend is favorable as it underlines YUM's strong commitment to boosting shareholder value through buybacks, likely aiding in the appreciation of the remaining shares. This consistent buyback strategy further suggests that Yum Brands generates ample free cash flow and has strategic foresight in capital allocation.