How you can cash in on one company taking the whole world by storm

McDonald's was a standout company during the recent recession. Slate magazine declared it "chief among the Great Recession's winners."

The title isn't without due. After all, it has grown earnings per share at a compounded annual growth rate of 22% over the past three years. And it was one of just a handful of companies whose stock posted positive returns in 2008 -- and one of even fewer with the guts to raise its dividend over this span.

But the boom days of McDonald's are over...

And buying McDonald's stock right now is a horrible move!
Why?
For starters, McDonald's has saturated the U.S. market. Although its golden arches litter our street corners, there's growing distaste for all things McDonald's in America.

In fact, BusinessWeek reports that the only reason McDonald's was able to grow its bottom line during the recession was because it raised prices domestically. This strategy can't -- and won't -- last. After all, McDonald's core customer base consists of lower-income households, many of whom recently lost their jobs and are still struggling just to get back on their feet.

McDonald's faces a Sisyphean task here in the U.S.

One Morgan Stanley analyst recently stated there's already "clear evidence of a gradual deceleration in sales, especially in the core U.S. and European markets."

The only hope McDonald's has for growing is internationally... But here's the catch...

Internationally, McDonald's is light years behind one rival fast-food company. This competitor is already beating McDonald's at its own game, especially in up-and-coming countries like China. In two-thirds of the Chinese cities this rival operates in, it faces no competition from McDonald's.

Here's why this matters: The fast-food industry in China looks like America's in the 1950s. Which is to say Chinese citizens are just beginning to be hooked by the concept.

And if this company becomes to China what McDonald's is to the U.S. (which looks very likely), its stock could quickly skyrocket past McDonald's... And here's why that matters: this rival has a market capitalization that's less than a quarter of McDonald's.

So, please read on to find out more about this global leader, to see its New York Stock Exchange ticker symbol, and to discover why it's a great fit for your portfolio right now.

China's largest quick-serve restaurant concept is none other than Yum Brands' [NYSE: YUM] own KFC.

Unlike Col. Sanders' famous recipe, the investment case for Yum isn't a closely guarded secret. Yum's family of global, industry-leading brands and a first-mover advantage in the world's next superpower have positioned it to become to China what McDonald's is (was?) to America.

Yum is the world's largest fast-food restaurateur by number of locations. It oversees 36,000 KFC, Taco Bell, Pizza Hut, Long John Silver's, A&W, and East Dawning restaurants spread across 110 countries.

Yum's size affords it a couple of competitive advantages. First, it gives the company serious bargaining power with its suppliers, which is a huge deal in a world of $0.89 tacos.

Additionally, Yum's tough-to-match distribution capabilities allow for lower costs and for it to consistently establish new outposts in China well ahead of the competition. This is why challengers are literally years behind Yum's progress in China, where its locations outnumber McDonald's roughly three to one.

Even though Yum has already established itself as a fast-food giant in China, the opportunity still ahead is huge. China currently has about 600 million urban dwellers -- that's twice the entire population of the U.S. Even more amazing -- Yum has 6 times the number of stores in the U.S. than in China.

It's no wonder Yum is going to invest $1 billion in its China operations in the next three years alone -- to open more than 1,500 new stores.

You might be wondering how long this growth will last, given the difference in cultures and the opinion Americans have of fast-food restaurants as an unhealthy option.

But the opinion of fast food in China is completely different. The Chinese see fast-food restaurants as places to celebrate with the whole family, and not just a place to stop for a speedy in-and-out meal.

What's more, a researcher at Euromonitor International states that Chinese customers see a trip to restaurants like KFC "as a healthier alternative."

Surprising? Yes. But it makes sense because the hygiene standards at a restaurant like KFC are far superior to the average street food you'd find in China. The cleanliness and freshness of the ingredients are almost a guarantee, which is not something that most restaurants in China can claim to be true.

Yum isn't your traditional restaurant play
Yum owns only about 20% of its restaurants -- most of the rest are operated by franchisees. Along with footing the bulk of restaurant-level costs, franchisees pay Yum a fixed rate on their stores' gross revenue. Here in the U.S., this rate averages around 5% to 6%. By the end of 2010, CEO and Chairman David Novak is looking to slash Yum's percentage of U.S. stores owned to less than 10%.

The exception to this strategy, interestingly enough, is China, where the stores are so profitable that Yum wants to own the profit outright.

But what's even more important for a potential investor like you, is that Yum has a long history of taking care of its shareholders. The company consistently churns out several hundred million dollars in free cash flow, fueling a 2.2% dividend yield and a solid reputation for share repurchases.