Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 16th of January will not receive this dividend, which will be paid on the 5th of February.
Cracker Barrel Old Country Store's next dividend payment will be US$1.30 per share, on the back of last year when the company paid a total of US$8.20 to shareholders. Calculating the last year's worth of payments shows that Cracker Barrel Old Country Store has a trailing yield of 5.2% on the current share price of $158.32. If you buy this business for its dividend, you should have an idea of whether Cracker Barrel Old Country Store's dividend is reliable and sustainable. So we need to investigate whether Cracker Barrel Old Country Store can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Cracker Barrel Old Country Store paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Cracker Barrel Old Country Store generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Cracker Barrel Old Country Store's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Cracker Barrel Old Country Store's earnings per share have risen 10% per annum over the last five years. Cracker Barrel Old Country Store is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cracker Barrel Old Country Store has delivered an average of 26% per year annual increase in its dividend, based on the past ten years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Has Cracker Barrel Old Country Store got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Cracker Barrel Old Country Store's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 56% and 56% respectively. In summary, it's hard to get excited about Cracker Barrel Old Country Store from a dividend perspective.
Ever wonder what the future holds for Cracker Barrel Old Country Store? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.