Yum! Brands (NYSE:YUM – Get Free Report) and Choice Hotels International (NYSE:CHH – Get Free Report) are both consumer discretionary companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.
Profitability
This table compares Yum! Brands and Choice Hotels International’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Yum! Brands | 25.42% | -24.57% | 22.24% |
| Choice Hotels International | 12.65% | 216.71% | 10.71% |
Insider and Institutional Ownership
82.4% of Yum! Brands shares are held by institutional investors. Comparatively, 65.6% of Choice Hotels International shares are held by institutional investors. 0.1% of Yum! Brands shares are held by company insiders. Comparatively, 23.9% of Choice Hotels International shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
Analyst Recommendations
This is a breakdown of current recommendations and price targets for Yum! Brands and Choice Hotels International, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Yum! Brands | 1 | 12 | 14 | 0 | 2.48 |
| Choice Hotels International | 3 | 10 | 2 | 0 | 1.93 |
Yum! Brands currently has a consensus target price of $175.67, indicating a potential upside of 8.87%. Choice Hotels International has a consensus target price of $115.46, indicating a potential downside of 2.72%. Given Yum! Brands’ stronger consensus rating and higher probable upside, equities analysts clearly believe Yum! Brands is more favorable than Choice Hotels International.
Risk & Volatility
Yum! Brands has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500. Comparatively, Choice Hotels International has a beta of 0.65, suggesting that its stock price is 35% less volatile than the S&P 500.
Dividends
Yum! Brands pays an annual dividend of $3.00 per share and has a dividend yield of 1.9%. Choice Hotels International pays an annual dividend of $1.15 per share and has a dividend yield of 1.0%. Yum! Brands pays out 24.1% of its earnings in the form of a dividend. Choice Hotels International pays out 25.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Yum! Brands has increased its dividend for 8 consecutive years. Yum! Brands is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Valuation & Earnings
This table compares Yum! Brands and Choice Hotels International”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Yum! Brands | $8.21 billion | 5.36 | $1.56 billion | $12.46 | 12.95 |
| Choice Hotels International | $1.60 billion | 3.35 | $369.95 million | $4.50 | 26.37 |
Yum! Brands has higher revenue and earnings than Choice Hotels International. Yum! Brands is trading at a lower price-to-earnings ratio than Choice Hotels International, indicating that it is currently the more affordable of the two stocks.
Summary
Yum! Brands beats Choice Hotels International on 13 of the 17 factors compared between the two stocks.
About Yum! Brands
Yum! Brands, Inc., together with its subsidiaries, develops, operates, and franchises quick service restaurants worldwide. The company operates through the KFC Division, the Taco Bell Division, the Pizza Hut Division, and the Habit Burger Grill Division segments. It also operates restaurants under the KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill brands, which specialize in chicken, pizza, made-to-order chargrilled burgers, sandwiches, Mexican-style food categories, and other food products. The company was formerly known as TRICON Global Restaurants, Inc. and changed its name to Yum! Brands, Inc. in May 2002. Yum! Brands, Inc. was incorporated in 1997 and is headquartered in Louisville, Kentucky.
About Choice Hotels International
Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor in the United States and internationally. It operates through Hotel Franchising & Management and Corporate & Other segments. The company franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, Clarion, Clarion Pointe, Sleep Inn, Ascend Hotel Collection, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Studios, WoodSpring Suites, Everhome Suites, Cambria Hotels, Radisson Blu, Radisson RED, Radisson, Park Plaza, Country Inn & Suites by Radisson, Radisson Inn & Suites, Park Inn by Radisson, Radisson Individuals, and Radisson Collection. Choice Hotels International, Inc. was founded in 1939 and is headquartered in North Bethesda, Maryland.
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