Dividends4Life: Cracker Barrel Will Unlock Shareholders' Value with a Special Dividend

Shares of Cracker Barrel Old Country Store (NASDAQ: CBRL) have experienced a significant rise on the stock market since October 2011, moving from $40 per share to nearly $112 per share. It is also an interesting option for income investors, as the company has consistently increased its dividend payment over the past seven years. Biglari Holdings, the company's largest shareholder, has mentioned that it was considering a bid for the company because it believed that under Biglari's management, Cracker Barrel's assets would be much more productive. At the current price, is Cracker Barrel a better buy than McDonald's (NYSE: MCD) and Chipotle Mexican Grill (NYSE: CMG)?

To enhance shareholder value, Biglari proposed that Cracker Barrel should pay shareholders a special dividend of $20, effectively giving investors a 18% yield. It would convert the value, which was previously flowing to the company's board and management, to shareholders. At $111.30 per share, Cracker Barrel is valued at a bit more than 11 times its EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation and amortization). It is just a bit more expensive compared to an EBITDA multiple of 10.6 of McDonald's, but still much cheaper than the fast-growing Chipotle with an EBITDA multiple of 26.3. With a 2.80% dividend yield and the potential to unlock a lot of shareholder value, I think Cracker Barrel could fit well in the income portfolios of long-term investors.

Source: Motley Fool

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