Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) will pay a dividend of $0.25 on the 12th of November. This payment means that the dividend yield will be 2.3%, which is around the industry average.
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Cracker Barrel Old Country Store’s dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 23.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Cracker Barrel Old Country Store
The company has a long dividend track record, but it doesn’t look great with cuts in the past. Since 2015, the dividend has gone from $4.00 total annually to $1.00. Dividend payments have fallen sharply, down 75% over that time. Generally, we don’t like to see a dividend that has been declining over time as this can degrade shareholders’ returns and indicate that the company may be running into problems.
Given that the track record hasn’t been stellar, we really want to see earnings per share growing over time. Cracker Barrel Old Country Store’s earnings per share has shrunk at 15% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn’t be feeling too comfortable.
Overall, we don’t think this company makes a great dividend stock, even though the dividend wasn’t cut this year. The payments haven’t been particularly stable and we don’t see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don’t think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we’ve identified 3 warning signs for Cracker Barrel Old Country Store that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
