Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Cracker Barrel Old Country Store's shares on or after the 21st of October will not receive the dividend, which will be paid on the 9th of November.
The company'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$5.20 to shareholders. Calculating the last year's worth of payments shows that Cracker Barrel Old Country Store has a trailing yield of 3.9% on the current share price of $134.69. 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 check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cracker Barrel Old Country Store is paying out just 9.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Cracker Barrel Old Country Store generated enough free cash flow to afford its dividend. The good news is it paid out just 14% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Cracker Barrel Old Country Store earnings per share are up 6.5% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cracker Barrel Old Country Store has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Cracker Barrel Old Country Store an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Cracker Barrel Old Country Store is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Cracker Barrel Old Country Store is being conservative with its dividend payouts and could still perform reasonably over the long run. Cracker Barrel Old Country Store looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Cracker Barrel Old Country Store is facing. For instance, we've identified 4 warning signs for Cracker Barrel Old Country Store (2 are a bit unpleasant) you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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