Yahoo Finance Cracker Barrel Old Country Store (NASDAQ:CBRL) Will Pay A Smaller Dividend Than Last Year
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has announced that on 6th of August, it will be paying a dividend of$0.25, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 2.1% will still be comparable to other companies in the industry.
View our latest analysis for Cracker Barrel Old Country Store
Cracker Barrel Old Country Store Doesn't Earn Enough To Cover Its Payments
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Cracker Barrel Old Country Store's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
Earnings per share is forecast to rise by 53.1% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 102%, which is a bit high and could start applying pressure to the balance sheet.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $3.00 in 2014, and the most recent fiscal year payment was $1.00. The dividend has fallen 67% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
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. Cracker Barrel Old Country Store's EPS has fallen by approximately 22% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 4 warning signs for Cracker Barrel Old Country Store that investors should know about before committing capital to this stock. Is Cracker Barrel Old Country Store not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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