Jack in the Box (NASDAQ:JACK) Will Pay A Dividend Of $0.44

Jack in the Box Inc. (NASDAQ:JACK) will pay a dividend of $0.44 on the 9th of September. This payment means that the dividend yield will be 1.9%, which is around the industry average.

View our latest analysis for Jack in the Box

Jack in the Box's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Jack in the Box's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 63.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

Jack in the Box's Dividend Has Lacked Consistency

It's comforting to see that Jack in the Box has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the dividend has gone from $0.80 total annually to $1.76. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

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. However, Jack in the Box has only grown its earnings per share at 4.6% per annum over the past five years. If Jack in the Box is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, a consistent dividend is a good thing, and we think that Jack in the Box has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Jack in the Box you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.