The board of Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has announced that it will pay a dividend on the 31st of January, with investors receiving $1.30 per share. The dividend yield will be 5.4% based on this payment which is still above the industry average.

View our latest analysis for Cracker Barrel Old Country Store

Cracker Barrel Old Country Store's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to rise by 100.3% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 47% which brings it into quite a comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $1.00 in 2012 to the most recent total annual payment of $5.20. This implies that the company grew its distributions at a yearly rate of about 18% 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 Come By

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. In the last five years, Cracker Barrel Old Country Store's earnings per share has shrunk at approximately 8.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Cracker Barrel Old Country Store's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. 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. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Cracker Barrel Old Country Store (of which 1 is a bit unpleasant!) 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.

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