KSU’s third-quarter dividend
On August 16, Kansas City Southern (KSU), the United States’ smallest Class I railroad company, announced a quarterly cash dividend of $0.36 per share on its outstanding common stock. The company’s quarterly equity cash dividend is payable on October 3 to shareholders on record as of September 10.
Kansas City Southern has ~102.2 million outstanding common shares as of August 20. The dividend payment of $0.36 per share results in a quarterly cash dividend totaling ~$36.8 million for the third quarter.
KSU’s past dividend growth
In the graph above, we can see that Kansas City Southern has been quite conservative in terms of its historical dividend growth. On August 15, 2017, KSU increased its cash dividend to common stockholders from $0.33 per share to $0.36 per share. The company’s balance sheet as of June 30 shows that it has $6.1 million, 4% of which is noncumulative preferred stock. To an extent, this also explains KSU’s conservative equity dividend growth.
The dividend decision of a railroad company is also associated with the levels of its volume growth. If its volumes grow quickly, the company is likely to keep its dividend rise in check. The Association of American Railroads publishes railcar traffic data for major North American railroad companies (XLI) every week. The weekly data have exhibited mixed railcar traffic growth trends for Kansas City Southern in 2018. While other US railroad companies have witnessed growing trends in their 2018 total freight volumes, this isn’t the case with KSU.
Peers’ per-share dividends and growth
Recently, Norfolk Southern (NSC) raised the cash dividend on its common stock by 11% to $0.80 per share from $0.72 per share. This was the second dividend rise by NSC in 2018. Union Pacific (UNP) raised its quarterly cash dividend from $0.73 per share to $0.80 per share in the third quarter. Like NSC, UNP also increased its quarterly cash dividend twice this year. In the first quarter, CSX Corporation (CSX) raised its cash dividend by 10% to $0.22 per share from $0.20 in the fourth quarter of 2017.
In the next article, we’ll examine Kansas City Southern’s free cash flow.