Yum! Brands Enhances Shareholder Returns, Hikes Dividend
Zacks Investment Research | Jan 27, 2019 09:06PM ET
In a shareholder-friendly measure, Yum! Brands, Inc. (NYSE:YUM) announced a hike in its dividend payout. This is reflective of the company’s intention to utilize free cash for enhancing shareholders’ returns.
The company declared a 17% hike in its quarterly dividend. Yum! Brands raised quarterly dividend to 42 cents a share (or $1.68 annually) from the prior payout of 36 cents (or $1.44 annually). The increased dividend will be paid on Mar 8 to its stockholders on record as of Feb 14. The dividend yield, based on the new payout and the last closing market price, is approximately 1.8%.
Notably, dividend hikes not only enhance shareholder returns but also raise the market value of the stock. Therefore, companies often tend to attract new investors and retain the old ones through this strategy.
The company has earlier said that it is committed to return an additional $6.5-$7 billion to its shareholders through share repurchases and dividends over the next three years. Resultantly, the company expects EPS of at least $3.75 in 2019. On the international front, Yum! Brands aims to revamp its financial profile and thereby improve the efficiency of its organization and cost structure. By 2019, management expects to cut capex to about $100 million, increase free cash flow conversion to 100% and reduce General and Administrative (G&A) expenditures by approximately $300 million (or 1.7% of system sales).
Price Performance
Yum Brands’ efforts to boost its three iconic global brands and create more efficient cost structure are quite encouraging. Shares of the company have outperformed the industry in the past six months. The stock has gained 18.7% compared with the Zacks Investment Research
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