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How CSX Distributes Profits to Shareholders

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Strong shareholder returns

Over the past year, CSX (CSX) stock has returned 9% to its investors. It has more than doubled over the past five years. CSX’s strong growth in Intermodal and Merchandise, which forms approximately 73% of its total revenues, has led to higher operating cash flows.

The company rewards its shareholders through dividends and stock repurchases. CSX increased its quarterly dividend by 13% to $0.18 per share in 1Q15. It has increased its quarterly cash dividend 12 times over the past nine years. This represents a CAGR (compound annual growth rate) of 27%.

CSX’s overall dividend yield is 1.97% compared to the following yields for its peers:

  • Union Pacific (UNP) – 2.19%
  • Norfolk Southern (NSC) – 2.48%
  • Kansas City Southern (KSU) – 1.36%
  • Canadian Pacific Railway Limited (CP) – 0.7%
  • Canadian National Railway (CNI) – 1.66%

Together, these companies form 9.30% of the Industrial Select Sector SPDR Fund (XLI).

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Buyback

At the end of 1Q15, CSX had $818 million of cash, cash equivalents, and short-term investments. CSX expects to complete its 2013 share repurchase program in the current year, based on market and business decisions.

Since 2006, the company has repurchased 493 million shares for a total of $8.8 billion. This represents about 50% of its total shares outstanding. CSX also announced a new $2 billion share repurchase program on April 14, 2015. It expects to complete the program over the next 24 months.

Environmental concerns and traffic congestion on highways will drive growth for rail transport suppliers. CSX will be partially impacted by changing dynamics in the energy market. However, with investments in new initiatives, it’s expected to make up for the slowness in select markets.

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