Please ensure Javascript is enabled for purposes of website accessibility

Recession-Proof Stocks: Yum! Brands

By Selena Maranjian – Updated Nov 11, 2016 at 6:14PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Fight the recession with tacos, pizza, and fried chicken.

Looking for more juicy dividend stocks to weather a recession? Check out our special series on recession-proof stocks.

We sure seem to be in a recession, don't we? The stock market is sputtering, many people have been losing jobs lately, and scores of economists are wringing their hands. Investors without a healthy perspective are panicking, selling their stocks and subsequently sending prices down. (Was it Chicken Little who cried, "A Market Crash is Coming"?) Investors with a healthy perspective, though, realize that times like these create bargains in the market.

Here's one company you might want to consider. Just look at its historical returns:

Period

Return

2003

42.0%

2004

37.8%

2005

0.2%

2006

26.8%

2007

32.3%

Five-year average annual return

20.9%

10-year average annual return

16.3%

Data from Morningstar.com.

Pretty impressive, eh? It sure looks like a stock that can't be stopped. And if that table gives us one valuable lesson, it's that you shouldn't let a single bad year -- 2005, in this stock's case -- cause you to sell.  

So what company is this? It's no Johnny-come-lately, no obscure highflier. There's a good chance you've helped it grow by buying a pizza, a fried chicken leg, or a Burrito Supreme. It's Yum! Brands (NYSE:YUM), the owner of Pizza Hut, KFC, and Taco Bell, along with Long John Silver's and A&W Restaurants. Put all of its 35,000-plus restaurants together, and you're looking at the world's largest restaurant chain, with more locations than McDonald's (NYSE:MCD) (30,000-plus), Burger King (NYSE:BKC) (11,100-plus), privately held Subway (29,400-plus), and Wendy's (NYSE:WEN) (about 6,600).

Together, Yum!'s restaurants generate more than $10 billion in annual revenue, with a net profit margin of better than 9% -- slightly less than McDonald's 11%, but well ahead of Burger King and Wendy's. Its return on assets, at 12.6%, tops that of McDonald's. The stock recently sported a 2.1% dividend yield, with dividend payments having almost quadrupled since 2004.

Yum! Brands is a good stock to buy by many measures. For instance, if you're looking to take advantage of growth in Asia, Yum! has more than 3,000 restaurants in China, Thailand, and Taiwan. KFC is the top fast-food brand, and Pizza Hut is the premier casual-dining brand in mainland China. Apart from the company's China division, Yum! has more than 12,000 other international restaurants, having added more than 700 each year since 2000. The company is also a multibranding pioneer, with more than 4,000 restaurants worldwide that feature two of the company's brands under the same roof.

No matter how our economy zips or dips, doesn't this seem like a long-term winner?

Fools speak out
If you're wondering whether this would be a good stock for your portfolio, take some time to do a little digging. Our CAPS service, featuring the predictions and commentaries of thousands of successful investors, can be a useful resource. 

Fully 96% of our best-rated CAPS participants believe that Yum! Brands will outperform the market. Check out CAPS player jbobroff's informed opinion from last year: 

I have been to China 3 times in the last year and have seen three very important things: 1) a lot of KFCs and Pizza Hut stores 2) Long lines including lines out the door at a Pizza Hut in Shanghai on a Saturday night and 3) a number of suppliers producing product (packaging, etc) for KFC and talking about the growth of that business. Combine that with increases in wages (20-25% per year) in China creating improving standard of living for the working class (therefore, more customers for quick-service restaurants), a dominance over McDonalds (beef is not as big of a part of the Chinese diet), and a first mover advantage in China, and you have a clear winner for the next 5-10 years.

So what do you think about Yum! Brands? Pop over to CAPS, and enter your own prediction. Let your opinion be counted!

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$110.65 (-0.13%) $0.14
McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$245.95 (-0.80%) $-1.99
The Wendy's Company Stock Quote
The Wendy's Company
WEN
$19.07 (-0.37%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.