Covered, compounding, and carrying franchisor leverage. Yum paid $680 million of dividends from $1,318 million of free cash flow in fiscal 2025, 51.6%, a pass, and the quarterly rate has risen every year in the record shown, to $0.75 in February 2026, with no cut. Leverage is the caution: net debt of $10,850 million is about 4.4x reconstructed EBITDA of $2,471 million, in the fail band, and under the filter it grades warn rather than failing on its own while coverage passes. The 1.97% trailing yield clears the sub-1% line.
Key risk: Debt is 4.4x EBITDA, so a sales or refranchising slip tightens the balance sheet long before it threatens the payout itself.
Changes if: Net debt/EBITDA falls below 3x, or the free-cash-flow payout crosses 60%.
- ✓Cash-flow cover 51.6% of FY2025 free cash flow, pass (<60%).
- !Leverage About 4.4x on reconstructed EBITDA, fail band (>4x) — a caution, not a fail, while coverage passes; franchisor leverage is structural but leaves little deleveraging room.
- ✓Growth record Quarterly rate raised every year in the record shown, $0.30 in 2017 to $0.75 in 2026; no cut in 10 years.
- ✓Trap screen Yield 1.97%, no cut, payout under 100%; not a trap pattern.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.