Cracker Barrel Old Country Store (NASDAQ:CBRL) Has Affirmed Its Dividend Of $1.30

The board of Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has announced that it will pay a dividend of $1.30 per share on the 7th of November. This means the annual payment is 7.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Cracker Barrel Old Country Store

Cracker Barrel Old Country Store's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 116% of what it was earning and 92% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Earnings per share is forecast to rise by 42.8% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 84% - on the higher side, but we wouldn't necessarily say this is unsustainable.

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 $2.00 in 2013, and the most recent fiscal year payment was $5.20. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Cracker Barrel Old Country Store's EPS has declined at around 15% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Cracker Barrel Old Country Store's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Cracker Barrel Old Country Store you should be aware of, and 1 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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