- Jack in the Box pays a healthy dividend with a positive bias for growth.
- The company has had a massive turnaround effort that should bear fruit for investors.
- Competitors have higher yields but also higher valuations and dimmer prospects for growth.
Should you invest in Jack in the Box stock?
By the time you get through this article, you'll know what you need to know about the stock, the Jack in the Box share price and its dividend.
The key takeaway: Jack in the Box can offer a turnaround story and a growth story as well as a Jack in the Box stock price that comes with an established dividend. The company is not yet well known as a dividend grower but that may change down the road. Until then, as an investor, you can look forward to growth and an attractive payout.
Jack in the Box Inc. Overview
Jack in the Box was founded in 1951 when its owner Robert Oscar Peterson rebranded an existing fast food concept as Jack in the Box. The new chain was to be drive-thru oriented and featured the first two-way intercom for drive-thru service. The concept proved popular and led to the design of the iconic Jack in the Box drive-thru locations featuring a smiling clown across California and the west.
The original chain was company owned and private and eventually sold to Ralston Purina, which operated it for many years. During this time, the company grew and expanded until hitting a slow patch in the early 1980s. It was about this time that Ralston Purina decided to sell the company to management. Management reinvigorated the brand and by 1987, it went public.
Longtime CEO Larry Comma altered the business during the early 2000s which led to brand stagnation and reduced sales and profits. In 2018, the franchisees held a "no confidence" vote, which led to his resignation. The current CEO, Darin Harris, came on board in June 2020 after serving as a franchise operator for Qdoba and Papa John’s and as a senior executive for Captain D’s, Arby’s and Cici's Pizza.
Today, the company has accelerated the switch from company-owned to franchised, leaning hard on digital, expanding into new territories, and unifying system-wide menu choices. These efforts helped reestablish Jack in the Box as a player during the COVID-19 pandemic and set it up for long-term sustained growth as well. The company sells a diverse range of chicken finger meals, hamburgers, chicken sandwiches and international-themed items like tacos and egg rolls.
Jack in the Box Dividend and Dividend History
Jack in the Box first paid its dividend in 2014 so it has a recent dividend history. The company has increased its payout over the years if not at a consecutive annual pace. The average rate of increase is running well over 10% and company metrics suggest it could sustain a few more like it if it chose to do so. The dividend yield is attractive as well, about 2%, above the broad market average. The company pays its dividend on a quarterly basis and buys back shares as well. The board of directors approved a fresh buyback allotment late in 2022 that is worth $200 million to investors over the course of several years.
Dividend stocks are the foundation of many investment strategies. How many dividend stocks you purchase is up to you, but Jack in the Box could be one of them. Read on for more information and to learn how dividend stocks work.
Let's take a look at dividend safety and attractiveness, its positive balance sheet and analyst ratings to help you determine whether JACK fits into your investment goals.
Dividend Safety and Attractiveness
By Wall Street standards, you can consider Jack in the Box dividends relatively safe, with a low 28% payout ratio. This means the company only pays 28% of its earnings as dividends, a very reasonable amount that leaves ample cash flow to service debt and fund expansion plans. The yield near 2% is less attractive than competitors but the payout is cheap compared to competitors as well. Jack in the Box was trading near 15x its current-year earnings outlook in 2022 while competitors traded 19x to 25x earnings.
Positive Balance Sheet
Jack in the Box carries debt and net debt as well but the balance sheet is well managed. The long-term debt-to-asset ratio is very low at just over 1x assets, a strong position for a growth company.
The analysts' consensus in Jack in the Box slipped to a firm "hold" following the Del Taco acquisition because it was a little confusing. Why did Jack buy a taco store after it had already sold a taco store, Qdoba? Regardless of the reason, it was accretive to the top and bottom lines so sentiment should improve as results roll in and the expansion plans gain traction.
JACK Dividend Growth CAGR
The compound annual growth rate (CAGR) for Jack in the Box is the mean annual growth rate of an investment over a specified period of time longer than one year. The higher the CAGR, the better and a reason to buy dividend stocks. Jack’s CAGR in 2022 was only 2%. That said, the company had not increased its dividend for several years before and the last two increases were 10% and 33%, which are substantial increases and attractive to dividend growth investors. Note that a high CAGR could decline in the following years and create a headwind for share prices.
Dividend Capture Strategy for JACK
Let's walk through the dividend capture strategies for Jack in the Box.
Step 1: Buy Jack in the Box stock.
Buy the stock for the first step in the dividend capture strategy. You must do this before the ex-dividend day. You can hold the stock for the least amount of time by buying on the day before the ex-dividend day and holding 1 day until the ex-dividend day — only shareholders at the open of trading on the day of record can receive an upcoming payment.
Step 2: Hold Jack in the Box stock.
Next, hold Jack in the Box stock until the ex-dividend day. Doing this entitles you to receive the upcoming dividend. It doesn’t matter whether or not the investor owns the stock on the day the payment is distributed — any owner of record will receive the payment.
Step 3: Sell Jack in the Box stock.
The third and most difficult step involves selling the stock. Owners of record can sell the stock as soon as the ex-dividend day. The tricky part is selling the stock at break-even or higher because any losses will cut into the profits earned by “capturing” the dividend. Jack stock price tends to rise as the date of record approaches, then falls the day after and often by the dividend amount, which often happens among known dividend payers
Additional Strategy: Invest in Jack in the Box.
How to invest in dividend stocks like Jack in the Box? Follow steps one and two but hold off on step three from above. Dividend stocks and income investing involve buying and holding so you can earn dividends over time. When you should sell dividend stocks depends on the portfolio strategy, share price and market action.
Jack in the Box Winds Up for Growth
Jack in the Box offers an interesting play on fast food and hamburgers for three reasons:
- The first is CEO Darin Harris, who seems clued into what the modern fast-food consumer wants.
- The opportunity for growth, which is phenomenal. The company would have to triple in size to outcompete the No. 3 player, Wendy’s, and then triple again to match the No. 2 player, Burger King.
- The dividend, which has not grown now but will once the growth story has matured.
Let's take a look at some questions about Jack in the Box stock.
Is Jack in the Box’s dividend growing?
The Jack stock dividend continues to grow but is not yet a well-known dividend grower. The company has only made dividend increases but far fewer have been consecutive. The payout ratio is low so increases could be substantial at some point in the future.
What is Jack in the Box’s dividend yield?
The Jack in the Box dividend yield varies with the share price but tends to run in the range of 2% or so. The yield is lower than competitors in the burger/fast food arena but there are mitigating factors that include the company’s growth opportunity and the outlook for future dividend increases.
When does Jack in the Box pay dividends?
Jack in the Box dividend is an annualized payout that comes in four installments. Distributions are made once per quarter following the board’s approval. Jack in the Box has never paid a special dividend or irregular or extra dividend but it could happen in the future.
Companies Mentioned in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|McDonald's (MCD)||$267.76||-0.7%||2.27%||24.63||Moderate Buy||$323.63|
|Restaurant Brands International (QSR)||$66.18||-1.6%||3.32%||20.12||Moderate Buy||$79.19|
|Jack in the Box (JACK)||$68.12||-2.1%||2.58%||9.22||Hold||$97.35|
About Thomas Hughes
Thomas got his start with the markets while working as a Chef. In 2005 a chance invitation to attend the seminar “How To Buy And Sell Your Own Stocks” altered his worldview. Soon trading and stocks consumed his every waking moment to the point of excluding all else. Thomas now enjoys a much different lifestyle engaged in his true passion, uncovering great investments.