The Lebanon, Tennessee-based restaurant chain Cracker Barrel Old Country Store Inc. (CBRL) recently announced its decision to hike its quarterly dividend by 2 cents to 22 cents per share. This translates into a 10.0% increase from the prior dividend. The increased dividend will be paid on November 5, 2010, to stockholders of record on October 15, 2010. This brings the new forward annual dividend yield to 1.75% as of September 27, 2010.
 
Cracker Barrel has further enhanced shareholder value by repurchasing roughly 1.35 million shares in fiscal 2010 for a total of $62.5 million and reducing long-term debt by $65.0 million. In 2011, the company will continue its share repurchase activity and expects to repay $25 million of its long-term debt.
 
Cracker Barrel has a consistent track record of paying dividends, supported by its cash position and its ability to generate healthy cash flow. The last dividend hike of 11% to 20 cents was announced on September 18, 2008. Over the last five-year period, Cracker Barrel’s dividend has grown at a rate of 11%, higher than the industry average growth rate of 9.4%.
 
One of Cracker Barrel’s peers, McDonald’s Corp. (MCD) announced an increment in its dividend by 11% to 61 cents on September 23, 2010.
 
Another peer of the company, Yum! Brands Inc. (YUM) also increased its quarterly dividend by 4 cents to 25 cents, which translates into a 19.0% increase.
 
Yet another peer, Brinker International Inc. (EAT) increased its quarterly dividend by 27% to 14 cents per share on March 26, 2010, to boost shareholder value.
 
Cracker Barrel’s forward annualized dividend yield of 1.75% inched past the industry average of 1.57%. However, it lagged forward annualized dividend yields of 3.27%, 1.89% and 3.12% of McDonald’s, Yum! Brands and Brinker, respectively.
 
At the end of the fiscal year 2010, Cracker Barrel’s cash and cash equivalents jumped by 36.1 million to $47.7 million and long-term debt reduced approximately 10% to $573.7 million, further consolidating the fact that the company has strong cash position and the ability to provide a sound value to its shareholders.
 
We appreciate Cracker Barrel’s efforts to consistently enhance shareholder return even in times of a recessionary economy. Moreover, we believe that the company’s hike in dividend depicts the fact that it is in a good shape and is well positioned for future growth.
 
Cracker Barrel was founded in 1969 and operates as many as 595 company-owned locations in 41 states. We have a Zacks #3 Rank (short-term Hold recommendation) on Cracker Barrel.
 
CRACKER BARREL (CBRL): Free Stock Analysis Report
 
BRINKER INTL (EAT): Free Stock Analysis Report
 
MCDONALDS CORP (MCD): Free Stock Analysis Report
 
YUM! BRANDS INC (YUM): Free Stock Analysis Report
 
Zacks Investment Research