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Yum! Brands Raises Its Dividend for 3Q16

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Sep. 30 2016, Updated 11:05 a.m. ET

Dividend

On September 26, 2016, Yum! Brands’ (YUM) board announced that it would pay a dividend of $0.51 in 3Q16. The dividend is set to be paid on November 4, 2016, for shares held as of October 19, 2016. Analysts were expecting the dividend to be $0.47.

With its 3Q16 dividend, the company has paid total dividends of $1.5 year-to-date. Analysts expect the company to pay a dividend of $0.51, taking the total for 2016 to $1.94, a rise of 11.5% from $1.7 in 2015. In 1Q17 and 2Q17, analysts expect YUM to pay dividends of $0.5.

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Dividend yield

Dividend yield indicates how much a company pays out in dividends each year relative to its share price. For the next 12 months, analysts are expecting YUM’s dividend yield to be 2.3%. During the same period, peers Papa John’s (PZZA) and Domino’s Pizza (DPZ) are expected to pay dividends at yields of 1% and 1.1%, respectively.

Capital allocation

Apart from paying dividends, Yum! Brands also rewards its shareholders with share repurchases, or buybacks. As part of the spin-off of its China operations, YUM announced its intention to return $6.2 billion to its shareholders through share repurchases. From the beginning of 4Q15 until the end of 2Q16, the company repurchased shares worth $3.2 billion.

Since December 2015, YUM’s board has authorized share repurchases worth $5.7 billion, including $4.2 billion in May 2016. Repurchases reduce the number of shares outstanding, thereby increasing earnings per share.

In the next part of this series, we’ll take a look at Yum! Brands’ valuation multiple. YUM and Chipotle Mexican Grill (CMG) form a combined 0.3% of the holdings of the iShares S&P 500 Growth ETF (IVW).

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