Yum China Holdings (NYSE:YUMC) Has Re-Affirmed Its Dividend Of US$0.12

Yum China Holdings, Inc.'s (NYSE:YUMC) investors are due to receive a payment of US$0.12 per share on 21st of June. This means the annual payment will be 1.1% of the current stock price, which is lower than the industry average.

See our latest analysis for Yum China Holdings

Yum China Holdings' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. But before making this announcement, Yum China Holdings' earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

EPS is set to fall by 37.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Yum China Holdings' Dividend Has Lacked Consistency

Looking back, Yum China Holdings' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The first annual payment during the last 5 years was US$0.40 in 2017, and the most recent fiscal year payment was US$0.48. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Yum China Holdings' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Yum China Holdings has grown earnings per share at 8.6% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Yum China Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Yum China Holdings you should be aware of, and 1 of them is a bit concerning. Is Yum China Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.