Should You Invest in Jack in the Box Stocks?
By the time you read through this article, you’ll know what you need to know about the stock, the Jack in the Box stock price, and the 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 a set dividend. The company is not yet known as a dividend grower, but that could change over time. 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 owner Robert Oscar Peterson rebranded an existing fast food concept as Jack in the Box. The new chain would be drive-thru oriented and featured the industry’s 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 in California and the West.
The original chain was company owned and private and was eventually sold to Ralston Purina, who operated it for many years. During this time, the company grew and expanded until it entered a slow period in the early 1980s. Around this time, Ralston Purina decided to sell the company to management. The management gave the brand a new impulse and in 1987 it went public.
Longtime CEO Larry Comma turned the company around in the early 2000s, leading to brand stagnation and reduced sales and profits. In 2018, the franchisees held a “motion of no confidence”, which led to his resignation. 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 its transition from ownership to franchise, relying heavily on digital, expanding into new territories and unifying system-wide menu choices. These efforts helped rebuild Jack in the Box as a player during the COVID-19 pandemic and also ensured sustained growth. The company sells a diverse assortment of chicken finger meals, burgers, chicken sandwiches, and internationally themed items such as tacos and spring 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 sequential annual rate. Its average rate of increase is well above 10%, and business stats suggest it could hold a few more if it chose to. The dividend yield is also attractive, about 2% above the broad market average. The company pays its dividend on a quarterly basis and also buys back its own shares. The board of directors approved a new buyback allocation in late 2022 worth $200 million to investors over several years.
Dividend stocks are the foundation of many investment strategies. How many dividend shares your 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, positive balance sheet and analyst ratings to help you determine if JACK fits your investment goals.
Dividend Security and Attractiveness
By Wall Street standards, you can consider Jack in the Box dividends relatively safe, with a low payout ratio of 28%. This means that the company only pays out 28% of its earnings as dividends, a very reasonable amount that leaves enough cash flow to pay down debt and fund expansion plans for funds. The return of almost 2% is less attractive than competitors, but the payout is also cheap compared to competitors. Jack in the Box traded nearly 15x its current year 2022 earnings forecast, while competitors traded 19x to 25x earnings.
Jack in the Box has both debt and net debt, 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 analyst consensus on Jack in the Box dropped to a firm “hold” after the Del Taco acquisition because it was a bit confusing. Why did Jack buy a taco shop after he already sold a taco shop, Qdoba? Regardless of the reason, it contributed to the top and bottom line, so sentiment should improve as results roll in and expansion plans gain traction.
JACK Dividend Growth CAGR
The compound annual growth rate (CAGR) for Jack in the Box is the average annual growth rate of an investment over a period longer than a 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 hadn’t raised its dividend in several years and the last two increases were 10% and 33%, which are substantial increases and attractive to dividend growth investors. Be aware that a high CAGR may fall in the following years and create a headwind for stock prices.
Dividend Capture strategy for JACK
Let’s go through the dividend capturing strategies for Jack in the Box.
Step 1: Buy Jack in the Box stock.
Buy the stock for the first step in the dividend capturing strategy. You must do this before the day of registration or the day of official ownership of the shares. You can hold the shares for as short a time as possible by buying on the day of registration or just before – only shareholders registered on the day of registration can receive an upcoming payment.
Step 2: Hold Jack in the Box stock.
Then hold Jack in the Box stock until after the record day. Doing so will entitle you to the upcoming dividend. It doesn’t matter if the investor owns the shares on the day payment is made – every registered owner receives payment.
Step 3: Sell Jack in the Box inventory.
The third and most difficult step is selling the shares. Owners of the record can sell the shares as soon as the ex-dividend day, the day after the record date. The tricky part is selling the stock at breakeven or higher, because any losses will reduce the profit earned by “locking up” the dividend. Jack’s stock price usually rises as the record date approaches, then falls the day after and often by the dividend amount, which often happens with 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 wait with step three from above. Dividend stocks and income investing include buying and holding so you can earn dividends over time. When to sell dividend stocks depends on portfolio strategy, share price and market action.
Jack in the Box stands up for growth
Jack in the Box offers an interesting game of fast food and burgers for three reasons:
- The first is CEO Darin Harris, who seems to know what the modern fast food consumer wants.
- The opportunity to grow, which is phenomenal. The company would have to triple in size to outrun the No. 3 player, Wendy’s, and then triple again to match the No. 2 player, Burger King.
- The dividend, which hasn’t grown now, but will once the growth story matures.
Frequently Asked Questions
Let’s look at some questions about Jack in the Box stocks.
Is Jack in the Box’s Dividend Growing?
The stock dividend Jack continues to grow but is not yet a known dividend grower. The company has only implemented dividend increases, but much less sequentially. The payout ratio is low, so increases could be significant in the future.
What is the Jack in the Box Dividend Yield?
The Jack in the Box dividend yield varies with stock price, but is usually around 2%. Yields are lower than those of burger/fast food competitors, but there are mitigating factors, including the company’s growth potential and prospects for future dividend increases.
When does Jack in the Box pay dividends?
Jack in the Box dividend is paid on an annual basis in four installments. Distributions are made quarterly upon approval by the Board. Jack in the Box has never paid a special dividend or irregular or extra dividend, but it could happen in the future.