More importantly though is the Net Payout Yield. During the quarter, YUM hiked the dividend from $.21 to $.25 and bought back $283M worth of stock. No mention of the price paid so hopefully it was all during July when the stock was much lower. Annualized yield now jumps to over 4% and if you take the Q3 buyback numbers only it jumps to over 6%.
The yield is definitely more attractive now then in the recent past, but its concerning that the stock price is already at 52 week highs reducing the likelihood of follow through on the buyback. For now, Stone Fox will leave the position in YUM to roughly 2% of the Net Payout Yield Portfolio. The Q3 numbers remain impressive, but the valuation is challenging.
- Worldwide operating profit grew 14% prior to foreign currency translation, including +23% in China, +16% in Yum Restaurants International (“YRI”), and a decline of 2% in the U.S.
- Worldwide system sales growth prior to foreign currency translation of 5%, including +18% in China, +5% in YRI, and +1% in the U.S.
- Same-store-sales growth in each division including +6% in China, +1% in YRI, and +1% in the U.S.
- Worldwide restaurant margin improvement of 1.6 percentage points including increases in China, YRI, and the U.S.
- Significantly higher tax rate of 27.4% versus 19.9% in the third quarter of 2009.
- Announced a 19% increase in the Company’s quarterly dividend. The quarterly cash dividend will increase from $0.21 to $0.25 per share.
- Issued a 10-year, $350 million bond at 3.875%, which is the lowest coupon ever for a BBB- corporate name.