Jack in the Box (NASDAQ:JACK) Has Announced A Dividend Of $0.44

The board of Jack in the Box Inc. (NASDAQ:JACK) has announced that it will pay a dividend of $0.44 per share on the 30th of December. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Jack in the Box

Estimates Indicate Jack in the Box's Dividend Coverage Likely To Improve

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even in the absence of profits, Jack in the Box is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 70%, which we would be comfortable to see continuing.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.80 in 2014, and the most recent fiscal year payment was $1.76. This means that it has been growing its distributions at 8.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Jack in the Box May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Jack in the Box has seen earnings per share falling at 3.3% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Jack in the Box's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Jack in the Box make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Jack in the Box that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.