{"id":59339,"date":"2024-03-26T06:00:50","date_gmt":"2024-03-26T10:00:50","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=59339"},"modified":"2024-04-01T10:15:40","modified_gmt":"2024-04-01T14:15:40","slug":"cracker-barrel-cbrl-dividend-at-risk-a-close-look-at-financial-performance","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2024\/03\/cracker-barrel-cbrl-dividend-at-risk-a-close-look-at-financial-performance\/","title":{"rendered":"Cracker Barrel (CBRL) Dividend at Risk: A Close Look at Financial Performance"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">With a market cap of roughly $1.46 billion, <\/span><a href=\"https:\/\/quotes.ino.com\/charting\/?s=NASDAQ_CBRL\"><span style=\"font-weight: 400;\">Cracker Barrel Old Country Store, Inc. (CBRL)<\/span><\/a><span style=\"font-weight: 400;\"> has established itself as a major player in the restaurant industry. Its establishments feature restaurants paired with gift shops, serving breakfast, lunch, and dinner with dine-in, pick-up, and delivery options.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, the company is not only popular for its iconic dining experience but also for its commitment to returning value to shareholders through consistent dividend payouts. Last month, CBRL declared a quarterly dividend of $1.30 per share, payable to its shareholders on April 12, 2024.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Its annual dividend of $5.20 translates to a staggering 7.89% yield on the prevailing price level, while its four-year average dividend yield is 4.13%. Over the past three years, CBRL\u2019s dividend payouts have grown at a CAGR of almost 26%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Despite the allure of the company's annual dividend yield among investors seeking steady dividend income, its dividend payout ratio of approximately 105.56% raises notable concerns, particularly in light of the declining trend in its earnings per share since reaching a peak in early 2021.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">CBRL <\/span><a href=\"https:\/\/www.msn.com\/en-us\/money\/topstocks\/3-stocks-at-risk-of-a-dividend-cut-march-2024\/ar-BB1kmQYp?ocid=msedgntphdr&amp;cvid=840bcfdf287844a9b712336a5874ad4e&amp;ei=41\"><span style=\"font-weight: 400;\">allocated 94% of its cash flow<\/span><\/a><span style=\"font-weight: 400;\"> toward dividends and distributed over 116% of its profits in the past year to shareholders. These metrics reflect the percentage of earnings that a company distributes as dividends, and in CBRL\u2019s scenario, these figures are notably elevated.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Typically, traditional dividend-paying stocks strive to maintain a payout ratio closer to 75% of earnings to ensure sufficient resources for sustaining and improving operations. However, CBRL\u2019s notably high payout ratio raises concerns about its dividend sustainability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In its <\/span><a href=\"https:\/\/investor.cbrlgroup.com\/node\/24036\/pdf\"><span style=\"font-weight: 400;\">latest financial results<\/span><\/a><span style=\"font-weight: 400;\">, the company reported revenue of $935.40 million, revealing a marginal year-over-year increase, while its adjusted net income and adjusted earnings per share plunged 13% and 13.1% year-over-year, reaching $26.53 million and $1.19, respectively.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As of January 26, 2024, CBRL\u2019s cash and cash equivalents stood at $12.60 million, reflecting a substantial decline of 74.5% from $49.40 million as of January 27, 2023.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Commenting on the company\u2019s latest quarterly results, CBRL\u2019s President and Chief Executive Officer, Julie Masino, noted that despite margin pressures, there was encouragement from the improvement in traffic trends during the quarter. Masino attributed this improvement to investments in labor and advertising, alongside a focus on enhancing the guest experience.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, Masino highlighted ongoing progress in the strategic transformation efforts, with teams actively engaged in initiatives to enhance relevancy, deliver beloved food and experiences to guests, and drive profitability growth.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, despite the company's endeavors to enhance profitability growth, its current profitability levels continue to lag behind industry norms. For reference, the stock\u2019s trailing-12-month net income and levered FCF margins of 2.43% and 1.09% are 48.8% and 80.4% lower than the 4.76% and 5.53% industry averages, respectively.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In its fiscal 2024 outlook, the company anticipates total revenue between $3.50 billion and $3.60 billion. Expansion plans include opening two new CBRL stores and 9 to 11 new Maple Street Biscuit Company units. Capital expenditures are estimated to be between $120 million and $135 million.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Meanwhile, Wall Street analysts foresee a 29.7% year-over-year drop in its EPS in the upcoming quarter, while revenue is expected to be $836.92 million.<\/span><\/p>\n<p><b>Bottom Line<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Despite CBRL\u2019s highly appealing annual dividend yield and growth trajectory in dividend payouts over the past years, the company's notably elevated payout ratio of over 100% raises significant concerns about its dividend sustainability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While CBRL's latest financial results show slight revenue growth and demonstrate efforts to improve traffic trends and enhance guest experiences, its profitability remains below industry norms.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, the company has witnessed a declining trend in earnings per share. With CBRL dedicating most of its earnings toward dividend payments, the dropping earnings per share cast a shadow of doubt on the company\u2019s ability to maintain its dividend payments at the current price level.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, the expansion initiatives and associated capital expenditures in fiscal 2024 highlight the company\u2019s goals to invest in its future growth. While such investments can enhance revenue and profitability, they also impose short-term financial obligations and cash outflows.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The expansion investments, including opening new stores and units, require substantial financial resources, potentially elevating operational expenses and limiting the available funds for dividend payments.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Overall, the combination of substantial capital expenditures, dropping liquidity levels, declining earnings per share, and ongoing operational costs associated with expansion plans heighten the vulnerability of CBRL\u2019s future dividend payments.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That said, considering the possibility of dividend cuts in the near term, investors seeking classic dividend-paying stocks could keep a close eye on the shares of CBRL for a more favorable entry point.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>With a market cap of roughly $1.46 billion, Cracker Barrel Old Country Store, Inc. (CBRL) has established itself as a major player in the restaurant industry. Its establishments feature restaurants paired with gift shops, serving breakfast, lunch, and dinner with dine-in, pick-up, and delivery options. However, the company is not only popular for its iconic [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":59021,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[33828,33829,33830,33827],"class_list":["post-59339","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-allocated-94-of-its-cash-flow","tag-cracker-barrel-old-country-store","tag-inc-cbrl","tag-latest-financial-results"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Cracker Barrel (CBRL) Dividend at Risk: A Close Look at Financial Performance - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"description\" content=\"Despite Cracker Barrel\u2019s (CBRL) commitment to returning shareholder value through dividend payouts, the company\u2019s excessively high dividend payout ratio, coupled with its downward earnings trajectory, raises major concerns over its ability to sustain these dividend payments in the future. 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