Outside of the buying frenzy with my pension rollover, things have been fairly quiet this month as I just haven’t been seeing the price points that I wanted on most of the holdings that I’ve been evaluating.
However, I was able to make two small purchases of Cracker Barrel–which you may recall was one of the companies on my September watch list.
Background on Cracker Barrel
While I shared a bit of information about Cracker Barrel when discussing my watch list, it is worthwhile to share a bit more here and also touch on a few key points from their recent 4th quarter earnings announcement.
Cracker Barrel Old Country Store, which was founded in 1969, has been a favorite of road travelers for many years–in large part because their ~650 stores across 45 states are often located right along the major highways to offer weary travelers a place for a nice home-style meal.
In addition, their locations also feature a sizable gift shop that sells an assortment of items such as toys, apparel, candy, and various gift items.
With regard to 4th quarter earnings, it was not a rosy picture as they missed estimates on both earnings and revenue for the first time in at least seven quarters. The decrease was driven by declining traffic as well as increased commodity costs, and they reported comparable store restaurant sales decreased by 0.4% with an average check increase of 3.1% but a 3.5% decrease in traffic.
However, their retail component performed better with a 1.3% increase in comparable store sales driven primarily by women’s apparel, books, and stationary.
Looking forward, the Cracker Barrel leadership team is awfully excited about the rollout of a new menu platform based on the bone-in fried chicken.
And I mean really excited.
They must have mentioned it close to 20 times during their earnings call.
This new fried chicken initiative is part of their desire to focus on introducing new and craveable food, and their test rollout has received very positive feedback thus expediting their rollout to an additional 170 stores before Thanksgiving.
Cracker Barrel by the Numbers
The dividend growth from Cracker Barrel has certainly slowed over the last 2-3 years, with the recent increase of 4.2% lagging well behind their 5-year annual growth rate of 14.4%.
Looking at that alone though is slightly deceiving, as Cracker Barrel has also been paying a special dividend annually for the last four years. This year that special dividend came in at $3.75/share–which adds a nice boost to the annual dividend. Including the special dividend, their dividend growth would have checked in at a modest 5.5% increase this year.
Cracker Barrel is a Dividend Contender with a 16-year history of increasing their dividend and maintains a reasonable payout ratio of approximately 52%–which is slightly lower than recent years.
Adding to My Position
As mentioned earlier, I made two small purchases–unfortunately missing the nice dip after their earnings announcement as I was traveling for work and unable to keep an eye on the market.
Here is a summary of my two orders:
The additional 12 shares will add $60.00 in forward dividend income to my portfolio.
Assuming that Cracker Barrel maintains their trend with the special dividend–which I will say that I am being cautious about given their Q4 earnings and notes about Q1 in 2019 being a little soft–that would add an additional $48.00 in forward income if they raised the special dividend by the same $0.25 as they have the last four years.
While I am pleased that I have been able to add a few shares to one of the stocks on my September watch list, I will say that this month has been rather quiet as I just wasn’t seeing the great buying opportunities.
With Cracker Barrel, I am comfortable taking small nibbles in this range below $150/share but for now I will likely hold tight with the ~22 shares that I have and see how management works through some of the challenges that were raised in their latest earnings call. On the bright side, the CBRL management team has done well over the years and therefore I am optimistic that they will achieve their targets moving forward.
Over the last 8+ years, Cracker Barrel has been slightly better than the performance of the S&P 500 and while I expect they may continue to see some pressure, as long as they continue paying a respectable dividend–currently yielding 3.41%–I will be happy to hold.
Have you ever eaten at a Cracker Barrel Old Country Store?
What do you think of my purchase?
Side note: It has been years since I have eaten their personally, but a memory that I will never forget is stopping there on our family road trips to Florida and sitting on the rocking chairs while we waited for our table–and of course getting a little toy as a souvenir as well.