10 Stocks Taking Care of Investors: No. 8 Yum! Brands Inc. (YUM)

June 10, 2009 4:11 PM EDT

These 10 stocks have been rewarding investors with share buybacks, strong dividends, sales/earnings and stock performance and are worthy cornerstones of any portfolio. You can track the entire series here.

Number 8: Yum! Brands Inc. (NYSE: YUM)

Yum! Brands is the world's largest quick service restaurant company with its main brands including KFC, Pizza Hut and Taco Bell. Formerly known as TRICON Global the company changed its name to YUM! Brands, Inc. in 2002. YUM has over 36,000 units in more than 110 countries and territories.

Shares Buybacks: In 2007 Yum! had $1.5 billion of share repurchases. In 2008, Yum! had $1.6 billion of share repurchases. 2008 was the fourth straight year that Yum! returned over $1.1 billion to shareholders. The Company does not currently plan to repurchase shares during 2009.

Dividends: Yum! has nearly quadrupled its quarterly dividend since the initiation of dividends in May 2004. The current quarterly dividend is $0.19 per share, or $0.76 annually. The dividend yield on YUM is a respectable 2.2%. The Company is targeting an annual dividend payout ratio of 35% to 40% of net income.

Revenue/Profit: Revenues have grown from $9 billion in 2007 to $11.3 billion in 2008. Net income in that time has grown from $740M to $964M and EPS has grown from $1.21 to $1.96. For Q1 the company reported EPS of $0.48, which beat the Wall Street consensus by 8 cents. The company sees FY09 EPS of $2.10.

Stock Performance: Shares of YUM have greatly outperformed the broader market. Shares of YUM are up 10% YTD, versus a 3.6% move up in the S&P 500. Over the last year, YUM is down just 8% versus a 31% slide in the S&P 500. Over a 5-year period YUM is up 87%, versus a 17% slide in the S&P 500. A $100 investment in YUM at 12/26/03 would have been worth $191 at 12/27/08, that same $100 would be worth $88 in the S&P 500 and $70 in the S&P Consumer Discretionary index.

With billions in past share repurchases, a solid dividend that is poised to be increased, steady revenue growth, "yummy" earnings and a market-beating stock performance, Yum! Brands is "taking care of investors."


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