Yum! Brands, Inc. (Yum!) operates a system of franchise restaurants throughout 155 nations under KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill. Today, it has a market capitalisation of US$ 36.7 billion. Here, I’ll list down 7 major things that you need to know about Yum! before investing. They are as follows: 


1. Yum China

In October 2016, Yum! had spinned off Yum China, which is now listed in the US under YUMC. Yum China is one Yum!’s largest franchisee as it pays Yum! a 3% in license fee on system sales of KFC, Taco Bell and Pizza Hut in Mainland China. In relation with this spin-off, we’ll cover Yum!’s financial results starting in 2017. 


2. The Acquisition of The Habit Burger Grill in 2020

In March 2020, Yum! acquired the Habit Burger Grill for US$ 408 million. At that time, Yum! had 245 company-owned & 31-franchised restaurants located in the United States and Mainland China. Since then, it grew its restaurant network to 302 company-owned & 67-franchised restaurants as of Q3 2023. Still, The Habit Burger Grill remains the smallest of the 4 brands and the only brand, which had incurred a small operating loss of US$ 24 million in 2022. 


3. KFC Remains the Key Income Contributor to Yum!

In Q3 2023, Yum! operates 57,274 restaurants which is an increase from 43,675 restaurants in 2016. Of which, 29,051 are KFC restaurants, 19,469 are Pizza Hut, 8,385 are Taco Bell and 369 are The Habit Burger Grill. In 2022, KFC contributed the bulk of Yum!’s revenues. Despite having less stores, Taco Bell has accounted for more revenues than Pizza Hut in that year. 

Source: Yum!

Source: Yum!


4. Profitability

In 2017-2022, Yum! has generated on average US$ 1.3 billion in net income. 

Source: Yum!


5. Balance Sheet 

In Q3 2023, Yum! owes US$ 11.2 billion in long-term debt, which equals to 7.81 years of its operating cash flows in 2022. It means, Yum! has the ability to settle all of its long-term debts in 7-8 years with its annual operating cash flows, if the management chooses to do so. 


6. Cash Flows 

Also, it had generated US$ 8.0 billion in operating cash flows and raised US$ 2.4 billion in long-term debt. From them, Yum! Spent:

  • US$ 8.2 billion in share repurchases. 
  • US$ 3.2 billion in dividend payments. 
  • US$ 1.4 billion in capital expenditures. 

Source: Yum!


7. Valuation

Excluding 2020 (COVID-19 pandemic), Yum!’s P/E Ratio had averaged at 23.6 for the 6-year period. P/E Ratio had increased over time marginally as the price has increased faster than its net income, which was relatively flat in that period. For dividend yields, Yum! averages at 1.64% a year in 2018-2022. 


Conclusion: 

Yum! Brands had delivered a string of stable results since 2016. It had remained profitable and cash flow positive in 2020 when the pandemic hit. Such financial results are to be compared with its peers (like McDonald’s) to determine: which of these F&B companies delivered stable results and are attractive in valuation? 

Here, if you wish to pick up real skills, which enable me to sift out good quality deals from 1000+ stocks listed in Malaysia and Singapore and more importantly, avoid poor stocks which would cause catastrophic losses in the future, check out our free 1-Hour online webinar training on dividend investing:

Link:
Free Webinar: How to Build a Stock Portfolio that Pay Increasing Dividends?


But, if you are already pretty solid with investing and want to build a Growth-based Portfolio filled with the top 1% companies listed in the United States, check out our free 1-Hour online webinar training on growth investing:

Link:
Online Training: Case Study of 1 Actual Stock that I had Invested in and Why It Doesn’t Take High Risk to Generate High Returns in the Stock Market?


Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

Leave a Reply

Your email address will not be published.