While I was watching the Taco Bell Legends and Celebrity Softball Game, which was part of the 75th Major League Baseball All-Star Game festivities, two things came to mind: Man, I would love to have a Taco Bell taco right now, and I used to love watching fellow big guy Dave Winfield, or "Super Dave" as I used to call him, play for the Yankees.
Obviously, the rest of the world shares my yearning for tacos and other fast food offered by Yum! Brands (NYSE:YUM). The exclamation point clearly points to both the eating and the investing public's satisfying feeling about this company. With more than 33,000 restaurants in more than 100 countries and territories, Yum! has leveraged chain brands such as Taco Bell, KFC, Pizza Hut, A&W, and Long John Silver's.
With Taco Bell's being the official fast-food restaurant of Major League Baseball, Yum!, which reported second-quarter earnings last night, is following our national pastime's lead as an international operation. The company experienced particularly strong growth in countries such as China, which reported a 26% increase in system restaurants in operation in the second quarter.
Yum! Restaurants International is the company's fastest-growing division and propelled management to raise its 2004 earnings forecast for the company to $2.33 per share (from $2.31). The firm thinks that its global strength gives it a chance to offset material food price increases in the United States in order to produce the anticipated 13% earnings growth for the year. This international support highlights the importance of global diversity to a business of this size and market penetration.
With the domestic fast-food industry crowded with companies such as McDonald's (NYSE:MCD), Wendy's (NYSE:WEN), Burger King, and Domino's Pizza (NYSE:DPZ), which suffered through a lukewarm reception in its first day of trading on Tuesday, it's no wonder why Yum! has followed the successful international ventures of its rivals. I've been eating fast food for the better part of 35 years, although I must admit that it used to be much easier to digest a taco or absorb the grease emanating from french fries. With the world moving at the speed of a bullet and advertising becoming more powerful than a locomotive, it's no wonder that fast food has become so popular. You know this food is popular when you see Wendy's open until midnight, or a block-long line forming in the wee hours at the Krispy Kreme (NYSE:KKD) drive-through window.
It's easy to see that Yum! Brands has solidified its place next to McDonald's as the leaders in fast-food service. Once that talking Chihuahua flashed across the screen into our taco-eating hearts, the fortunes of the company were on the rise. Not only has it produced consistently excellent results of late, it also has generated significant enough cash flow to recently declare its first dividend of $0.10 quarterly per share (a yield of 1.05%) -- something that may even make income investors smile.
Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
