Is Cracker Barrel Old Country Store, Inc. Cooking Up Rewards For Investors?
Cracker Barrel Old Country Store Inc. (CBRL) has been a dividend darling the past few years with huge dividend increases and massive share buybacks while the share price was depressed. If you do a lot of travel by car you're most likely familiar with the old-timey restaurant/gift shop combination stores. It's' down home country cooking is great for the road weary traveler. Every now and then I get in the mood to venture away from the tried and true dividend growth companies and search for new-to-me companies to research and follow. As a dividend growth investor seeking to reach financial independence it's usually the new-to-me companies that are providing much higher dividend growth rates which is just icing on the cake. Cracker Barrel Old Country Store Inc. closed trading on Wednesday, May 28th at $101.14 giving a current yield of 3.95%.
Discounted Earnings:
Analysts followed by Yahoo!Finance expect Cracker Barrel to grow earnings 10.10% per year over the next 5 years and I've assumed they can grow at 7.58% (75% of 10.10%) for the next three years and at 4.00% in perpetuity. Running these numbers through a discounted earnings analysis with a 10% discount rate and summing over 30 years yields a fair value price of $114.95. This means the shares are trading at a 12.6% discount to the discounted earnings analysis.
Click here to read the rest of the analysis on Seeking Alpha.
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Discounted Earnings:
Analysts followed by Yahoo!Finance expect Cracker Barrel to grow earnings 10.10% per year over the next 5 years and I've assumed they can grow at 7.58% (75% of 10.10%) for the next three years and at 4.00% in perpetuity. Running these numbers through a discounted earnings analysis with a 10% discount rate and summing over 30 years yields a fair value price of $114.95. This means the shares are trading at a 12.6% discount to the discounted earnings analysis.
Click here to read the rest of the analysis on Seeking Alpha.
If you'd like to receive posts via email you can do so here or on the Subscribe page at the top of this blog. As an email subscriber you'll be the first to know about ideas that are running around in my head for the blog. Also make sure to follow me on Twitter @ JC_PIP to get real time updates of purchases and what I'm reading.
Thanks for the write up JC. I always found Cracker Barrel restaurant/stores interesting. They operate in a funny little niche, and doing a pretty good job. The quality and value of the food has declined markedly in the last 10 years, but what restaurant hasn't reduced quality.
ReplyDelete-Bryan
I picked up a few shares of CBRL shortly after their most recent dividend increase. Got them when they had a dividend yield at 4.15%. Looking over the past 10 years, there were just a few opportunities getting the company when they yielded barely over 3% and never over 4%. While I think the valuation currently is fair or maybe even slightly high, I thought the dividend yield was great and didn't want to miss the opportunity. Seems like the price has been pushing up slightly higher since my purchase which is pulling the yield down closer to the norms for this company.
ReplyDeleteI also picked up few CBRL last week. I don't have much exposure to restaurant stocks (other than CMG) and with CBRL having an yield around 4% with good revenue/earnings, I decided to get 15 shares.
ReplyDeleteI came across your blog a few months ago and have been a regular reader. I have been aggressive with my investments since the beginning of this year and have been focusing on dividend stocks. I also started my own blog couple of months back to document my journey on dividend investing and also to keep me motivated to continue investing in quality dividend growth stocks.