Yum Brands owns two of the world’s most dominant and scalable quick-service restaurant franchises which collectively generate approximately 90% of divisional operating profit and demonstrate consistent unit economics that support sustainable double-digit earnings growth. The company’s asset-light franchise model (98% franchised) generates exceptional return on invested capital and free cash flow conversion, enabling the firm to return substantial capital to shareholders through dividends and buybacks while simultaneously funding aggressive unit development.
The second transformative catalyst is the company’s leadership position in restaurant digitalization and operational technology deployment. This creates a sustainable competitive moat and margin expansion runway. The company achieved $10 billion in digital system sales during the most recent quarter, representing approximately 60% of total sales. This far exceeds industry averages and demonstrates best-in-class consumer engagement across mobile ordering, delivery aggregators, and loyalty programs.
Additionally, the strategic review of an underperforming franchise should address a persistent earnings drag and signals management’s discipline in portfolio rationalization, allowing the company to redeploy capital toward higher-return opportunities.
Meanwhile the shares trade at 23.1 times its forecast 2026 earnings with a 1.9% yield backed by 22 consecutive years of increases.
YUM! BRANDS INC. (New York symbol YUM; www.yum.com) operates over 62,000 restaurants in more than 155 countries. Its main banners are KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). Franchisees now operate 98% of outlets.
Yum is now conducting a strategic review of its Pizza Hut chain, which has struggled in the past few years due to strong competition and consumers preferring home delivery over dining at a restaurant. The review could lead to a spinoff, or the sale of the entire business. The company has not yet said when it expects to complete the process.
Meantime, Yum opened 1,131 new outlets (gross) in the three months ended September 30, 2025. It did not report store closures for the quarter.
The new outlets helped lift revenue in the quarter by 8.4%, to $1.98 billion from $1.83 billion a year earlier. However, that missed the consensus forecast of $2.00 billion.
On a same-store basis, sales improved 3% (excluding currency rates). Breaking that down by individual chain, same-store sales rose 7% at Taco Bell and 3% at KFC; however, they fell 1% at Pizza Hut.
If you exclude a special tax expense, earnings gained 15.3%, to $1.58 a share from $1.37. That topped the consensus estimate of $1.49.
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Yum Brands’ growth plans should keep dividends rising
The company still plans to increase its store count by 5% annually. It also continues to develop new menu items and expand its digital ordering platforms. As a result, Yum expects to raise its earnings per share by 8% annually.
For all of 2026, earnings are forecast at $6.66 a share. The stock trades at 23.1 times that forecast, which is a reasonable p/e in light of Yum’s popular brands. The $2.84 dividend yields 1.9%
Recommendation in Wall Street Stock Forecaster: Yum Brands Inc. is a buy for aggressive investors.
