McDonald’s Corporation (MCD), Sonic Corporation (SONC): Multiple Brands Definitely Help Yum! Brands, Inc. (YUM) Right Now

Business Environment

The KFC chicken scandal might have hurt McDonald’s Corporation (NYSE:MCD) as well, although the drag here might also be temporary. McDonald’s announced that its Asia Pacific, Middle East, and Africa division reported 9.5% weaker comparable sales in January, and the restaurant mentioned that the chicken supply chain controversy had affected its restaurants in China. In February, McDonald’s announced 1.6% weaker comparable sales for the APMEA division. McDonald’s Corporation (NYSE:MCD) did explain that it had weaker sales in January and stronger sales in February because of the timing of the Chinese New Year, and the leap year in 2012 made the February same store sales comparison tougher. Nevertheless, McDonald’s pointed out chicken as an issue in January, but not in February, which may mean that the scandal has died down in general.

McDonald’s offers a forward yield of 3.1% that also surpasses Yum! Brands, Inc. (NYSE:YUM)’s figures. Like Pepsi, McDonald’s offers a 54% payout ratio, as both the soft drink maker and the burger chain are mature businesses. McDonald’s Corporation (NYSE:MCD) boasts a 19.8% profit margin and a forward P/E of 16 that also look good in comparison with Yum!.

Takeaway

Yum!’s surprising results in China provide the main explanation for this restaurant company’s current price. KFC’s rapid recovery suggests that the previous earnings expectations for 2013 were too low. Nevertheless, other large food companies offer bigger dividends, so growth matters for Yum! Taco Bell menu upgrades in the United States could provide this growth, as the restaurant could both bring in diners at off peak hours with its drink specials and sell more Doritos tacos during peak hours. With KFC posting better results in China, and Taco Bell preparing to post better results in the United States, Yum! Brands, Inc. (NYSE:YUM) looks like it could be worth its premium right now.

The article Multiple Brands Definitely Help Yum! Right Now originally appeared on Fool.com and is written by Eric Novinson.

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