Leading railroad company, CSX Corporation (CSX) announced a 3:1 stock split commencing June 15, for shareholders of record on May 31.
Additionally, the company has announced a dividend hike of 38% to 36 cents (or 12 cents post split) per share, which is also payable on the same date to shareholders of record on May 31.
In concurrence with the above, the company announced a share repurchase program of $2 billion that will soon come into effect (no specific date disclosed) and will be over by the end of 2012. All three proposals were approved by the board of directors.
Till date, CSX has delivered strong financial performance on the back of solid growth across all segments despite steep fuel prices. Given its thriving business and growing profitability, CSX remains committed to its shareholders by delivering high returns through dividends and share repurchases.
In 2010, the company twice raised its dividend. The first increase was by 9% to 24 cents per share on February 10, 2010 paid on March 15, to shareholders of record at the close of business on February 26.
The subsequent hike was of 8% to 26 cents per share on September 29, 2010 paid on December 15 to shareholders of record on November 30. The current quarterly dividend equates to $1.04 per share on an annual basis representing yield of approximately 1.35%.
The company also purchased shares worth $300 million in the first quarter of 2011 and completed its multi-year $3 billion share repurchase program.
Further, CSX continues to invest in its network to enhance safety and improve service and reliability for its customers. The company has launched the National Gateway, a multi-year public-private infrastructure initiative, which will significantly improve the efficiency of the freight network between the Mid-Atlantic ports and the Midwest. CSX Corp. has already launched a key part of this project, the Northwest Ohio Intermodal Terminal early this year.
Going forward, the company remains optimistic economic recovery that should drive maximum growth in terms ofterms of revenue, volume and pricing and entail investments in Infrastructural developments to support long-term growth. We expect the company to remain focused on growth with increased profitability in most of its products lines, especially emphasizing on Intermodal and adopt a better pricing policy to allow inflation and rising fuel cost recovery.
However, the underlying unfavorable market trends in some of its businesses, capital intensive nature of business, soaring furl prices and competitive threats from railroads like Norfolk Southern Corp. (NSC)keep us on the sidelines.
We currently maintain our long-term Neutral recommendation on CSX supported by Zacks #3 Rank (Hold).
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