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I have always wondered why the street is enamored with a company that can only grow EPS 10-12%, when they are reducing shares outstanding by 8% (company FY08 guidance). This raises so many red flags!

I recently ran my sustainability analysis on YUM, only to conclude that there is shift in how the company is going to allocate is cash flow over the coming years. Quietly, YUM’s has been allocating more cash toward capital spending - this increases the risk profile of YUM (relative to the past) and drives lower incremental returns for shareholders.

Here are some of the facts regarding YUM's uses of cash over the past 12-months:
Dividends paid declined by 3% (partly due to a lower share count).
Yum has burned thru $1.4 billion in cash (Cash from ops - Cap Ex. - Share repo - Dividends)
Interest expense increased 8% (due to higher debt levels to fund the cash burn)
Shares outstanding declined by 2% (despite spending $1.9B on buying back stock)
Capital spending has increased 13%

First, YUM’s capital spending needs are growing and that will come at the expense of the share repurchase program. Second, if interest expense in up 8% (due to higher debt levels to buy back stock) and the share count has only declined by 2%, how is that accretive to shareholders?

This dogs hunting day are over.