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Is Jack In The Box A Good Dividend Stock?

Jack In The Box’s store. Source: Flickr Image

Jack In The Box (NASDAQ:JACK) has been a dividend-paying stock since fiscal 2014.

The company pays cash dividends on a quarterly basis.

Jack In The Box’s common stock shareholders will receive the quarterly cash dividend.

Since fiscal 2014, the company has been paying cash dividends continuously and has only suspended the dividend payout once in the last 6 years which was on fiscal 2020 Q3.

Jack In The Box has resumed the dividend payments in the following quarter as soon as the company found it unnecessary to cut the dividends given the high earnings power and the free cash flow being generated even during the COVID age.

In short, Jack In The Box has strong financial health and can afford to pay a dividend.

At the same time, the company also has resumed the stock buyback in fiscal 2021 2Q after being suspended for 4 consecutive quarters in fiscal 2020.

In this article, we will take a quick look at a couple of Jack In The Box’s dividend metrics, including the dividend rate history, historical yield, dividend to earnings and free cash flow payout ratio.

Additionally, from the payout ratios, we can find out why Jack In The Box can afford the cash dividends and is such an excellent dividend-paying stock.

Let’s move on!

Jack In The Box’s Dividend Yield

Jack In The Box's trailing dividend yield

Jack In The Box’s trailing dividend yield

* Dividend yield is calculated by the author based on the weekly close price adjusted for splits obtained from Yahoo Finance and the TTM dividend rate.

Let’s take a quick look at Jack In The Box’s trailing dividend yield history for the period from 2017 to 2021.

According to the chart, Jack In The Box’s dividend yield amounted from around 1% to as high as 7% in the last 5 years.

Its dividend yield was the highest at nearly 7% back in 1Q 2020.

The reason for the extraordinary dividend yield in that period was primarily driven by the crash of Jack In The Box’s stock price which had fallen to as low as $20 USD per share when the COVID-19 pandemic had just started.

Prior to this special period, we can see that Jack In The Box’s dividend yield hovers around 2%, which is quite low.

Post-fiscal 2020, Jack In The Box’s dividend yield has been on a decline and reached around 1% in mid-2021, driven primarily by the recovering stock prices and the flat dividend rates.

However, Jack In The Box’s dividend yield reached slightly above 1% as of June 2021 after the company hike the quarterly payout by 10%.

If not for the 10% dividend hike in fiscal 3Q 2021, Jack In The Box’s dividend yield would have probably sunk below 1% in June 2021.

Jack In The Box’s Annual Dividend Per Share Declared

Jack In The Box's annual dividend rate

Jack In The Box’s annual dividend rate

* Annual dividend per share declared is obtained from Jack In The Box’s financial statements.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.
* Jack In The Box’s annual dividend shown in the chart may slightly differ from the company website’s reported annual dividend because calendar year dividend is reported on the website instead of fiscal year dividend.

As mentioned, Jack In The Box has started paying cash dividends since fiscal 2014.

Since then, the company has been paying quarterly dividends continuously except for fiscal 2020 when Jack In The Box suspended the fiscal 3Q 2020 dividend for only 1 quarter.

Jack In The Box has resumed the cash dividends in subsequent quarters.

On an annual basis, Jack In The Box’s dividend rate reaches $1.60 USD per share reported from fiscal 2017 to fiscal 2019, the highest figure the company has ever paid out.

Jack In The Box’s annual dividend rate declined to $1.20 USD per share in fiscal 2020 after the company temporarily suspended 1 quarter of dividend payment.

As of fiscal 2021, Jack In The Box’s annual dividend grew to $1.24 USD per share, slightly higher than that of fiscal 2020, due primarily to a 10% dividend hike in fiscal 3Q 2021.

Jack In The Box’s Quarterly Dividend Per Share Declared

Jack In The Box's quarterly dividend rate

Jack In The Box’s quarterly dividend rate

* Quarterly dividend per share declared is obtained from Jack In The Box’s financial statements.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.

The chart above shows only a portion of Jack In The Box’s quarterly dividends that dated back to fiscal 2017.

Jack In The Box has maintained its quarterly dividends declared at $0.40 USD per share since fiscal 2017.

In fiscal 2020, Jack in The Box suspended the 3Q 2020 quarterly dividend but has resumed the dividends in subsequent quarters, suggesting the strong financial health of the company even during the middle of a severe pandemic.

Additionally, Jack In The Box hiked the quarterly dividends by 10% in fiscal 2021 3Q to $0.44 USD per share, reflecting the continued commitment of the company to return cash to its shareholders.

Jack In The Box’s TTM Dividend Per Share Declared

Jack In The Box's TTM dividend rate

Jack In The Box’s TTM dividend rate

* TTM dividend per share declared is calculated by the author based on the quarterly data obtained from Jack In The Box’s financial statements.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.

From a TTM perspective, Jack In The Box’s dividend declared per share hovered around $1.60 USD prior to the dividend cut in fiscal 2020.

After the dividend cut, the TTM dividend declared declined to $1.20 USD per share in fiscal 3Q 2020 and has remained at this level for 4 consecutive quarters before being hiked up to $1.64 USD per share in fiscal 3Q 2021.

As of fiscal 2021 Q3, Jack In The Box’s TTM dividend rate of $1.64 USD per share was the highest throughout the company’s historical cash dividend payout.

Jack In The Box’s Dividends Declared

Jack In The Box's dividend declared

Jack In The Box’s dividend declared

* Dividends declared is based on the number of shares outstanding multiplying the dividend declared per share.
* TTM dividends declared is calculated by the author based on the quarterly data obtained from Jack In The Box’s financial statements.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.

In terms of dividends declared, Jack In The Box’s cash outflow totaled as much as $40 million on average on a TTM basis between fiscal 2017 and fiscal 2021.

However, the cash outflow for dividends declared has been on a decline, due primarily to the large stock buybacks that have taken place in the last 10 years.

While stock buybacks have been the cause of the decreasing cash outflow for dividends declared, Jack In The Box has temporarily suspended 1 quarter of dividend declared, notably in fiscal 2020 3Q, thereby triggering a steep drop in cash outflow in the same quarter.

As seen in the chart, the cash outflow declined at a much faster rate in fiscal 2020 3Q.

As of fiscal 2021 2Q, Jack In The Box’s total cash outflow for dividends declared totaled slightly above $27 billion, the lowest figure the company has ever reported.

Despite the lower cash outflow for dividends declared, the dividend per share declared has not decreased a tiny drop and has even trended higher by 10% in fiscal 2021 3Q, suggesting a healthy dividend payout by Jack in The Box.

Jack In The Box’s Dividends Paid

Jack In The Box's dividend paid

Jack In The Box’s dividend paid

* Dividends paid is the cash paid on dividends as reported in the statement of cash flow.
* TTM dividends paid is calculated by the author based on the quarterly data obtained from Jack In The Box’s statements of cash flow.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.

The cash paid on dividends should be more or less equal to the cash outflow for dividends declared which we saw earlier.

However, both can differ significantly sometimes if the company also pays dividends to minority interests and to preferred shares.

Also, they can differ when the dividends declared are paid in the next fiscal quarter instead of in the same quarter.

For Jack In The Box, it does not have minority interests nor does it have preferred shares.

Therefore, they are equivalent.

All told, Jack In The Box has the same trend for cash paid on dividends or dividends paid as the plot of dividend declared.

Since fiscal 2017, Jack In The Box’s cash paid has been on a decline and has the steepest drop in fiscal 2020 3Q, driven largely by the company’s dividend cut in the same quarter.

As of fiscal 2021 Q2, Jack In The Box’s dividends paid equal slightly above $27 million, also the lowest figure the company has reported.

Again, the declining dividends paid have been driven mainly by the decreasing common stock outstanding over the years.

Jack In The Box’s Dividend Declared To Earnings Payout Ratio

Jack In The Box's dividend to earnings payout ratio

Jack In The Box’s dividend to earnings payout ratio

* Dividend declared to earnings payout ratio is calculated based on the ratio of TTM dividend declared with respect to the TTM net income.
* TTM net income or net profit is the profit attributable to common stock shareholders after accounting for all costs and expenses.
* TTM figures are calculated by the author based on the quarterly data obtained from Jack In The Box’s financial statements.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.

To find out how affordable Jack In The Box’s cash dividend is, we can look at the company’s dividends declared to earnings payout ratio.

The ratio measures Jack In The Box’s dividends declared with respect to the net profit.

That said, Jack In The Box’s earnings payout ratio averages around 39% since fiscal 2017, with fiscal 2020 2Q reporting the worst at more than 70%.

The net profit could still cover the dividend declared at a 70% ratio but it’s a stretch.

Therefore, in the following quarter, Jack In The Box had decided to suspend the cash dividend because of uncertainties surrounding the pandemic.

When things got cleared up in the following quarter, Jack In The Box reinstated the cash dividends and continued with the cash dividend payments without any further cut.

In subsequent quarters, the earnings payout ratios actually declined instead of heading higher, indicating the minimal impact the pandemic had on the company’s operations.

The declining dividend-to-earnings payout ratio also means that Jack In The Box has sufficient earnings or profit to cover the dividends declared.

As of fiscal 2021 Q2, Jack In The Box’s dividend-to-earnings payout ratio amounted to only 17%, the lowest level the company has ever seen.

At only 17% of net profit, Jack In The Box’s cash dividends look pretty safe and the company should have plenty of wiggle room to increase the payout in the future.

As a matter of fact, Jack In The Box had just hiked the quarterly dividend in fiscal 2021 3Q by 10% to $0.44 USD per share, illustrating the strong financial health of the company even in the midst of a severe pandemic.

Jack In The Box’s Dividend Paid To Free Cash Flow Payout Ratio

Jack In The Box's dividend to free cash flow payout ratio

Jack In The Box’s dividend to free cash flow payout ratio

* Dividend paid to free cash flow payout ratio is calculated based on the ratio of TTM dividend paid with respect to the TTM free cash flow.
* Free cash flow is the difference between operating net cash and net cash from investing activities.
* TTM figures are calculated by the author based on the quarterly data obtained from Jack In The Box’s financial statements.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.

With respect to free cash flow, Jack In The Box’s dividends paid consumed only 24% of free cash flow on average since fiscal 2017.

The highest figure the ratio has ever reached was only 40% in the last 5 years.

Not only that, but the free cash flow payout ratio has also been on a decline, reaching only 18.5% in fiscal 2021 2Q, a record low to Jack In The Box.

The decreasing free cash flow payout ratio has been primarily driven by the growing free cash flow as well as the stock buybacks which has significantly decreased the stocks outstanding.

While Jack In The Box’s earnings payout ratio jumped to 70% in fiscal 2020 Q2, the respective free cash flow payout ratio totaled only 20.5%, illustrating the excess free cash flow being generated despite having a lower profit.

In short, Jack In The Box has been able to generate sufficient free cash flow to cover the dividends paid and even has tonnes of room for a dividend hike.

Jack In The Box’s Dividend Paid To EBITDA Payout Ratio

Jack In The Box's dividend to EBITDA payout ratio

Jack In The Box’s dividend to EBITDA payout ratio

* Dividend paid to EBITDA payout ratio is calculated based on the ratio of TTM dividend paid with respect to the TTM company-adjusted EBITDA.
* Company-adjusted EBITDA is the cash earnings which has been adjusted to exclude certain income and expense items.
* TTM figures are calculated by the author based on the quarterly data obtained from Jack In The Box’s financial statements.
* Jack In The Box’s fiscal year begins on Oct 1 and ends on Sunday closest to Sept 30.

The adjusted EBITDA is almost equivalent to the operating net cash but before the changes in working capital.

The purpose of the adjusted EBITDA is to measure Jack In The Box’s core performance without being distorted by non-core items such as depreciation and amortization, restructuring costs, stock-based compensation expenses, etc.

That said, Jack In The Box’s dividends paid with respect to EBITDA is even lower compared to other ratios.

According to the chart, Jack In the Box’s dividends to EBITDA payout ratio averages only 15% since fiscal 2017.

Similarly, the ratio also has been going lower, indicating the strong cash earnings of the company.

In the latest quarter of fiscal 2021, Jack In The Box’s dividends paid to EBITDA ratio clocked in at only 8%, half of the 16% payout ratio reported a year ago.

At this ratio, Jack In The Box’s dividends paid consumes only 8% of the cash earnings, leaving plenty of room for the company to hike the dividend in the future.

As a matter of fact, Jack In The Box has just hiked the quarterly dividend by 10% in the following quarter, illustrating the strong dividend health of the company.

Summary

Jack In The Box is an excellent dividend-paying stock and can afford to pay and even hike the cash dividends.

Not only does the company have a strong earnings power but also generates an increasing free cash flow.

These two metrics are the most important factors when it comes to finding out the dividend health of a company.

With respect to earnings and free cash flow, Jack In The Box’s dividend declared and dividends paid consumed only a small portion of the said earnings and free cash flow, suggesting that the company has the necessary financial capability to pay and even hike a dividend.

Additionally, Jack In The Box also has been buying back its common stocks, thereby further reducing the cash outflow required for the cash dividends.

During the COVID time, most companies operating a restaurant have either folded or indefinitely suspended the dividends.

However, this is not the case for Jack In The Box.

In fact, the company has thrived and raised the dividend by 10% in 2021.

In short, Jack In the Box is a safe dividend stock and can afford to continue the cash dividend even in the middle of a severe pandemic.

We can safely conclude that Jack In The Box is a pandemic-proved dividend stock.

References and Credits

1. All financial figures in this article were referenced and obtained directly from Jack In The Box’s annual and quarterly filings available in Jack In The Box’s Stock Information.

2. Featured images in this article are used under Creative Commons License and sourced from the following websites: Thomas Hawk and theimpulsivebuy.

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