Jack in the Box (NASDAQ:JACK) Is Due To Pay A Dividend Of $0.44

Jack in the Box Inc.'s (NASDAQ:JACK) investors are due to receive a payment of $0.44 per share on 8th of April. The dividend yield will be 5.6% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Jack in the Box's stock price has reduced by 31% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Jack in the Box

Jack in the Box's Long-term Dividend Outlook appears Promising

A big dividend yield for a few years doesn't mean much if it can't be sustained. While Jack in the Box is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 49%, which we would be comfortable to see continuing.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was $0.80, compared to the most recent full-year payment of $1.76. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 12% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

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 Jack in the Box's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 3 warning signs for Jack in the Box (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.