In the previous article in this series, we reviewed the operating margins of Kansas City Southern (KSU). In this article, we’ll discuss KSU’s stock buyback pursuant to a $500.0 million buyback program launched in 2015.
In the first half of 2016, KSU repurchased 2.9 million shares totaling $253.4 million. Compared with the share repurchase of $51.0 million in 1Q16, the company increased the repurchases four times to $202.4 million in 2Q16. The graph above shows that the stock buybacks totaled $20.0 million in the corresponding quarter last year.
In its 10K filed last year, the company clearly stated that it doesn’t indulge in stock buybacks. However, on May 14, 2015, KSU withdrew its revenue and volume guidance and announced a stock buyback of up to $500 million. The buyback expires on June 30, 2017.
KSU rewards shareholders through quarterly dividends. The company paid a quarterly dividend of $0.33 per share, or $35.6 million, in 2Q16. KSU’s current dividend yield is 1.34%. Below are the dividend yields of its peers:
- Union Pacific Corporation (UNP): 2.3%
- CSX Corporation (CSX): 2.5%
- Norfolk Southern Corporation (NSC): 2.6%
- Canadian Pacific Railway (CP): 1%
- Canadian National Railway (CNI): 1.9%
Genesee & Wyoming (GWR) has a no equity dividend policy.
Investors looking for exposure to the transportation sector can invest in the SPDR S&P Transportation ETF (XTN). This ETF invests 13.4% of its holdings in US-originated Class I railroads.