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BruceM
Participant ○○○

CBRL

At a 3.1% CY, CBRL seems so-so....until you consider their special dividend they've been paying since 2015.

Current price: $167.26

Current Dividend: $1.30 X 4 = $5.20 next 4 quarters, assuming no other increases

Special Dividend: $3.00

Total Dividend over next 4Q: $8.20

4Q Current Yield: 4.9%

Of course, we don't know if they'll pay the special dividend again, but they have since 2015, although this year it declined, going from $3 to $3.25 to $3.50 to $3.75 to $3.

Cash flows look good

CBRL CFFO and Div per share.jpg

Its covering its new investing activities well with CFFO after dividends

CBRL percent of CFFI paid with CFFO.jpg

The means they don't have to go to the debt or equity markets to finance new restaurants or upgrade existing ones. In fact, the dividend announcement indicates they plan on buying back up to $50MM in equity.

Interest expense is under 4% and dividend to net CFFO payout is under 35%. Both excellent trends

CBRL interest expense.jpg

But what really caught my eye is the amount of cash they carry....and this is likely what is driving the annual special dividends, as the IRS accumulated earnings rule makes it hard to hold cash (that represents earnings)

CBRL CCE and Dividends.jpg

As can be seen, CBRL carries multiples of its dividend in C&CE. Don't see that very often!

Just did a market order for 100 shares

And as a side note....they put a Cracker Barrel in Janzen Beach not long ago, and it has become one of our favorite hangouts. Good food for reasonable price. DW and I can get in an out with ice tea and tip for dinner for around $25...and I like their chicken dinner :-)

BruceM

19 Replies
GranTorino
Follower ○○○

Re: CBRL

Bruce, thanks for the highlighting of the cash. I have been a holder since 2014, one of the few restaurant stocks I trust owning for dividend income, aside of course from the behemoth McDonalds. GT

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Bizman
Explorer ○○○

Re: CBRL

Yes, thanks for your analysis and the headsup, Bruce.  It's also got an ROIC in the 20's and an ROE in the 30's.  Debt to equity ratio has trended down.  I can't find much not to like.  

One small quibble might be the reduction in their special dividend, but I guess you can't have everything.

Anyone know about their expansion rate and Same Store Sales trends and such?

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Bizman
Explorer ○○○

Re: CBRL

Just noticed this headline dated today, probably explains it being down 1.5%.  I would assume that their turning away of this radical terroristic freak should help their brand with anyone not clinically insane, not hurt it.  Buying opportunity?

Cracker Barrel won’t host church group run by Grayson Fritts, cop who called for LGBTQ executions

https://www.marketwatch.com/story/cracker-barrel-wont-host-church-group-run-by-grayson-fritts-cop-wh...

 

 

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Bizman
Explorer ○○○

Re: CBRL

So I listened to the last earnings call (3Q19) last night, and their earnings growth has slowed and projections for the 4th quarter and fiscal year aren't very impressive.  They talked up headwinds from wages and commodity inputs (especially pork), potential tariff problems because China is the source of a bunch of their products for their retail operation, and they seemed concerned about the summer traveler customers possibly staying home instead of traveling with the economic/tariff anxiety currently swirling around.

Given slowing growth over the last year or so and that a recession would probably hit their earnings fairly hard, I think I'll wait and watch for now, and look for better news and/or a better margin of safety.  

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BruceM
Participant ○○○

Re: CBRL

Bizman

I think the reduction in the special dividend to $3 has to do with management's commitment for up to a $50MM share buy back which at $169/share would be a buyback of about 300,000 shares, or about 1.2% of the float.

BruceM

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Bizman
Explorer ○○○

Re: CBRL

That makes sense.  The capital return and commitment to shareholders is awesome.  CBRL is definitely high on my watch list.

I guess I'm just a bit concerned about their growth profile going forward.  Their slide deck from their October 2017 Investor Day talked about having a bit north of 650 stores, with potential buildout of 750-800.  At the current rate of 8 per year, which doesn't seem to be doing too much for revenue and profit growth this year at least, that's 12 - 19 years of store growth, without much operational leverage that I can see at least lately.  Maybe this is just a short term hiccup and they will reignite higher growth as cost pressures ease and such, but I guess I want to see evidence thereof.

Skepticism may well not be warranted, but I do tend to think it also might be a bit more impacted cyclically by a downturn.  While every downturn won't be as bad as 2008-09, it does look like the stock price took a heck of a hit back then, with a peak to trough decline of about 75%.

I guess I'm just a bit of a nervous Nellie here, and want to follow it for a while and be assured that their earnings growth isn't mostly behind them.  Plus, I don't have much experience investing in the restaurant Biz, so I keep wondering if I'm missing something.  You know, a circle of competence thing.  But thanks very much for bringing it to my attention, Bruce.  I wish more companies had their apparent commitment to shareholders.

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GranTorino
Follower ○○○

Re: CBRL

To comingle Bizman and Bruce- 1. IMHO all restaurant stocks besides MCD ($1 menu, etc) are subject to the price of gas, as if you take a trip and spend $100 to fill up instead of $50 that bites into your eating tab. In other words, how much you spend on that east coast Crackerbarrel on the I-95 exit can take a major hit on gas. 2. I think the main China hit would be in the kitschy/touristy/homespun gift shop CBRLs have- which may not be the commonly sold items but the profit margins have to be insane. Thanks again Bruce, GT

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rascfw
Explorer ○

Thanks, BruceM

My only complaint about CBRL in Tallahassee FL is that it is too popular. There's always a line waiting to be seated. It moves fairly quickly --once you manage to park your car. It's so popular, you have to go early or late to find a parking spot!

Actually, the above is true about ALL CBRL restaurants I have gone to (or tried) when on the road or on vacation in other areas and other states in the SE region.

I have never owned CBRL, but it is one of several steady-eddy dividend-oriented stocks I keep on a watchlist. Maybe it's time to reconsider.

Sincere regards, Susan

P.S. You're right about the fried chicken.... and the rest of the menu. Mmm-mmm-mm!

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BruceM
Participant ○○○

Re: Thanks, BruceM

For comparison, other 'casual dining' publicly traded companies include

Darden (DRI), owner of Olive Garden, Longhorn, Cheddar's Scratch Kitchen, etc and currently yielding just under 3%

Brinker (EAT), owner of Chilis and Magiano's Little Italy, currently yielding about 4%

Dine Brands (DIN), owner of Applebees and IHOP, with a current yield of around 2.9%

Bloomin Brands (BLMN), owner of Outback Steakhouse, Flemings Prime Steakhouse and Carrabba's Italian Grill. CY of about 2.1%

Ark Restaurants (ARKR), owner of 19 Restaurants primarily on the east coast. Tiny at a market cap of <$70MM and CY of 5%

I've browsed the cash flows of these and none look as favorable as CBRL in their trending...at least with a quick eye scan.

BruceM

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GranTorino
Follower ○○○

Re: Thanks, BruceM

All this CBRL talk I have to ask where is Copie? He tuned me in to CBRL a few years ago. Did he make the new board migration? GT

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Bizman
Explorer ○○○

Re: Thanks, BruceM

So I got off the fence and trimmed my too big and fully valued position in WELL to buy some CBRL.  Thanks again BruceM for the headsup and analysis.  I wish more companies treated their investors like partners the way they do.

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BruceM
Participant ○○○

Re: Thanks, BruceM

Hi Bizman

So you trimmed your position in WELL? Well, I wish I had the courage to do that. My basis in the 1800 shares of WELL I bought back in the late 90s, is rapidly headed to zero as WELL continues to return capital (4.8% of 2018 dividend was ROC). I know its only 15% I'll be giving up, assuming I limit the number of shares sold to keep us out of IRMAA...but dam!! I hate paying and getting nothing in return....at least nothing tangible.

But these prices are getting into nose-bleed territory, so I suppose I too am going to need to get off the fence....

Thanks for the reminder

BruceM

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Bizman
Explorer ○○○

Re: Thanks, BruceM

It is painful to pay tax on winners, but it's a lot better to have such high class problems than the alternative.  I've got big gains in several winners like Microsoft, but I don't see a huge need to act now to take profits.  While no one knows the future, and a bearish analyst knocked it down today, with only 20% of workloads having been shifted to the cloud, you'd think AWS and Azure would have a huge secular tailwind for quite awhile.  Although it isn't cheap.

By the way, I came across something I thought was interesting looking at CBRL on the Schwab website.  It shows 80% of shares held by institutions, and a quite high 16.3% short interest as of 5/31/19.  You'd think those shorts would be pretty expensive with the dividends CBRL pays.  And as a contrarian indicator, maybe we get a short squeeze at some point.

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BruceM
Participant ○○○

Re: Thanks, BruceM

Yes, with all that cash on the books and healthy earnings growth, I can imagine the institutionals see this as a low Beta stock.

"You'd think those shorts would be pretty expensive with the dividends CBRL pays."

Yes, so you'd think. I've never understood why someone would hold a high quality, high dividend stock in a short position. I mean, with CBRL paying $4.30 Ex-D July 18 at the current price of $170, that means those in short position on Ex-D are down 2.5% just on the dividend. I never understood why anyone would do this, unless it's some sort of required portfolio hedge to maintain their standard deviation....but wouldn't buying puts do the same? And I'd imagine as we come up on Ex-D, we may indeed see a short squeeze.

Whatever....I'm holding for a reliable long term dividend.

BruceM

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bluezy
Explorer ○

Re: Thanks, BruceM

Hi Bruce,

With the 140m cash investment in Punch Bowl Social and the commitment for growth funding I believe we have seen the last of the special dividends.

https://seekingalpha.com/pr/17579822-cracker-barrel-punch-bowl-social-enter-strategic-relationship

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BruceM
Participant ○○○

Re: Thanks, BruceM

We'll see. If Punch Bowl is accretive to the bottom line cash flows, their net cash flow generation could actually increase. But as I said in that SA article, these kinds of expansions do not usually do this, as they tend to be done primarily to use up excess capital, avoid the IRS excess accumulated earnings rule, expand their total assets on the balance sheet to justify higher salaries and to avoid hostile take-overs.

BruceM

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FatKat
Participant ○○

Re: CBRL


@Bizman wrote:

Just noticed this headline dated today, probably explains it being down 1.5%.  I would assume that their turning away of this radical terroristic freak should help their brand with anyone not clinically insane, not hurt it.  Buying opportunity?

Cracker Barrel won’t host church group run by Grayson Fritts, cop who called for LGBTQ executions

https://www.marketwatch.com/story/cracker-barrel-wont-host-church-group-run-by-grayson-fritts-cop-wh...

 

 


Good to know, I never liked haters.

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copie
Follower ○○○

Re: Thanks, BruceM

I have been a holder of CBRL since 2014 at around $90 share. Always drip the div. during the august payment to buy more shares with special div. 

Talked to a manger at Cracker B. last year and he said they had opened up one of there first store in Ca. and had to extend the closing of store from 10 p.m. to midnight to get the lines down. I knew it would be a hit once they started eating down south cooking! Might be able to get some grits ! :)

Copie

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rpkrpi
Explorer ○

Re: Thanks, BruceM

Detailed analysis of $CBRL. There are a few other articles there on the stock.

https://seekingalpha.com/article/4289451-cracker-barrels-dividend-growth-makes-long-term-buy

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