Kansas City Southern Sees a Fall in Share Repurchases
Floods Wash Away Kansas City Southern's Carloads in 1Q16
Shareholder’s returns
Earlier, we reviewed the operating margins of Kansas City Southern (KSU). Here, we will go through the stock buyback program launched by KSU.
As discussed in the first article, KSU’s stock has risen by 29.2% since the beginning of 2016. This might be due to better 1Q16 earnings in spite of natural disasters, positive sentiments related to more freight hauling, and a perceived hike in crude prices going forward.
In the first quarter of 2016, Kansas City Southern repurchased 0.6 million shares aggregating $51.0 million. The above graph shows that there were no stock buybacks in 1Q15.
Share repurchase initiative
In its 10K filed last year, Kansas City Southern (KSU) 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. After this announcement, KSU’s share fell by 3.7% on the same day.
Dividends
Kansas City Southern rewards its shareholders through quarterly dividends. The company paid a quarterly dividend of $0.33 per share, or $35.6 million, in the first quarter of 2016. This represents no rise in the per share dividend paid by the company on a year-over-year basis. KSU’s current dividend yield is 1.37%. We will compare this with the peer group:
This represents no rise in the per-share dividend paid by the company on a year-over-year basis. KSU’s current dividend yield is 1.37%. Let’s compare this with the peer group:
Union Pacific (UNP): 2.6%
CSX Corporation (CSX): ~2.7%
Norfolk Southern (NSC): ~2.8%
Canadian Pacific (CP): ~1.1%
Canadian National Railway (CNI): ~1.7%
Investors interested in the railroad space can consider the iShares US Industrials ETF (IYJ). This ETF holds 5.0% in all Class I railroads.
In the final part of this series, we will go through analysts’ opinions about Kansas City Southern.
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