Dividend Increase | YUM Brands (YUM)

Jan. 31, 2019 8:11 AM ETYum! Brands, Inc. (YUM)
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Long Only, Value, Dividend Growth Investing, Long-Term Horizon

Contributor Since 2013

I started a dividend growth investment strategy a few years ago and am aggressively growing my portfolio to churn out enough dividends to reach financial independence.


  • YUM Brands (YUM) had previously been a Dividend Contender with 13 years of dividend increases; however the lost the title during the YUM China (YUMC) spinoff.
  • The BoD just approved a 16.7% increase in the dividend payment raising it from $0.36 to $0.42.
  • Shares currently yield ~1.82% based on the new annualized payout.

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income

Getting a pay raise while sitting on the couch? Sign me up! Thanks YUM Brands for another dividend increase!

There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now". The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits. Dividend growth investing is much the same way. It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends. You mean I get a pay raise just for owning a small piece of a company? Not going and doing R&D for new products or technology. Not selling any products. Not managing any employees or inventory. Not making sales calls. All I had to do was have the foresight to invest some of my savings in excellent companies.

Last Friday the Board of Directors at YUM Brands (YUM) approved an increase to their quarterly dividend. The dividend payout was increased from $0.36 to $0.42. That's a huge 16.7% increase from the prior payout. YUM Brands had previously been a Dividend Contender with 13 consecutive years of dividend increases; however, once they spun off YUM China (YUMC) the combined dividend was technically a decrease. Since then YUM Brands has been back on their dividend raising ways. Shares currently yield 1.82% based on the new annualized payout.

The new $0.42 dividend payment will be payable on March 8th to shareholders of record as of February 14th.

Since I own 42.099 shares of YUM Brands in my FI Portfolio this raise increased my forward 12-month dividends by $10.10. This is the 5th dividend increase I've received from YUM since initiating a position in May 2014 plus 1 dividend cut. Despite the reduction due to the YUM China spinoff the cumulative organic dividend growth from YUM has still totaled 13.5%. According to US Inflation Calculator the cumulative rate of inflation over that same time is 6.1%.

A full screen version of this chart can be found here.

YUM Brands' dividend growth has been fantastic despite the reduction due to the YUM China spinoff. Every year since initiating a dividend in 2004, except for 2017, the 1 year dividend growth rate has come in greater than 10%. Even accounting for the reduction from the spinoff the 10 year rolling dividend growth rate is still in the high single digits.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 2004 can be found in the following chart.

A full screen version of this chart can be found here.

*2019's dividend assumes the new payout of $0.42 per share is maintained for the rest of 2019.

Wrap Up

This raise increased my forward dividends by $10.10 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 3.08% this raise is like I invested an extra $328 in capital. Except that I didn't! One of the companies I own just decided to send more cash my way.

That's how you can eventually reach the crossover point where your dividends received exceed your expenses. That's DIVIDEND GROWTH INVESTING AT WORK! The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

Thus far in 2019 I've received 4 total increases from 4 of the 51 companies held in my FI Portfolio. In total my forward 12-month dividends have increased by $24.35.

My FI Portfolio's forward-12 month dividends increased to $6,594.92. Including my FolioFirst portfolio's forward dividends of $92.16 brings my total taxable accounts dividends to $6,687.08. My Roth IRA's forward 12-month dividends increased to $413.64.

Do you own shares of YUM Brands? Are you happy with that 17% pay raise?

Please share your thoughts below.

I am not a financial professional. Please consult an investment advisor and do your own due diligence prior to investing. Investing involves risks. All thoughts/ideas presented in this article are the opinions of the author and should not be taken as investment advice.

Disclosure: I am/we are long YUM.

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