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How US Truckload Carriers Returned Cash to Investors in 3Q17

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Forward dividend yield

In this part of the series, we’ll examine the 3Q17 cash distributions of the major US truckload carriers (IYT) we’re covering in this series: JB Hunt Transport Services (JBHT), Landstar System (LSTR), Werner Enterprises (WERN), Ryder System (R), and Heartland Express (HTLD). Road carriers return cash in the form of dividends and stock buybacks. A company’s forward dividend yield is calculated by dividing a year’s worth of projected future dividends by its current stock price. Road carrier stocks that pay dividends at regular intervals may appeal to income investors.

From the above chart, we see that Werner Enterprises (WERN), Landstar System (LSTR), and Heartland Express (HTLD) have forward dividend yields of 0.8%, 0.4%, and 0.35%, respectively.

Nature of trucking not conducive to dividends

In the United States, trucking is largely an unorganized, fragmented industry. Independent truck owners and carriers form a sizable chunk of the US trucking market. The cyclical and capital-intensive nature of the industry requires road carriers to put profits back into their businesses. So dividend payouts are normally lower, resulting in low dividend yields.

Ryder System’s dividends have risen steadily since 2005 at a CAGR (compound annual growth rate) of 10% until 2017. The company raised its annual dividend from $0.44 per share in 2016 to $0.46 per share in 2017. Werner declared a quarterly cash dividend of $0.07 in 3Q17. The company has paid cash dividends every quarter since July 1987.

JB Hunt Transport Services paid a quarterly cash dividend of $0.23 per share in the third quarter 0f 2017. Heartland’s 3Q17 dividend stood at $0.02 per share, which was its 57th consecutive quarterly cash dividend.

Stock buybacks

Looking at stock buybacks, we see that JB Hunt Transport and Ryder System both had stock buybacks in 2017. Ryder’s stock buyback of $65.8 million in the first nine months of 2017 was significantly higher than $25.6 million in the same period last year. JBHT also upped its share repurchases from $174.7 million in the first nine months of last year to $179.8 million in the first nine months of 2017. Heartland, Landstar, and Werner don’t engage in stock buybacks.

Has the freight environment changed in favor of US truckload carriers? Let’s look at the October 2017 truck tonnage index in the next part of this series.

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