Cracker Barrel Old Country Store, Inc.’s (NASDAQ:CBRL) investors are due to receive a payment of $0.25 per share on 12th of November. This means that the annual payment will be 2.3% of the current stock price, which is in line with the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Cracker Barrel Old Country Store’s stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Cracker Barrel Old Country Store was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 23.6%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Cracker Barrel Old Country Store
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $4.00 in 2015 to the most recent total annual payment of $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 dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Cracker Barrel Old Country Store’s EPS has declined at around 15% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.
