Are Transportation Stocks Becoming More Shareholder Friendly?
Fuel expenses represent a key input cost for any transportation company. Oil price has increased roughly 8.3% in a month and is currently trading at around $78 a barrel. This surge in a key input cost naturally hurts the bottom-line growth of transportation companies. Oil prices have been on the rise since Russia and Saudi Arabia extended voluntary supply cuts through the end of the current year.
Apart from oil expenses, expenses are high on the labor front as well, courtesy of the multiple pay-related deals being inked in the space lately. This is because the bargaining power of various labor groups has increased, given the high travel demand and labor crunch in the post-COVID-19 world.
Apart from high costs, supply-chain disruptions continue to dent transportation stocks. The inflationary environment, together with supply-chain tightness, is pushing costs higher. Even though the Federal Reserve held interest rates steady at its meeting this month, it signaled another hike this year to tackle stubborn inflation.
Lackluster freight demand also represents a major headwind for transportation stocks. Highlighting the weak freight demand, the Cass Freight shipments Index declined 7.2% year over year in December 2023. This measure deteriorated year over year in the past 10 months, confirming the overall declining trend.
Despite these aforementioned challenges, we would like to remind investors that investing in the transportation sector will be a lucrative option because of its shareholder-friendly nature.
We believe shareholder-friendly (dividend-paying as well as making share buybacks) transportation stocks should be on an investor’s watchlist to withstand headwinds and volatility. We have identified the following stocks from the Zacks Transportationsector — GATX Corporation GATX, Canadian National Railway Company’s (CNI), FedEx Corporation (FDX), Trinity Industries, Inc. (TRN), J.B. Hunt Transport Services, Inc. (JBHT), Landstar System, Inc.’s LSTR and Air Lease Corporation’s AL — which have made use of their financial strength and approved dividend hikes or share repurchases, in turn, highlighting their pro-shareholder stance.
GATX currently carries a Zacks Rank #2 (Buy). CNI, FDX and TRN carry a Zacks Rank #3 (Hold). While AL carries a Zacks Rank #4 (Sell), LSTR and JBHT carry a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s take an in-depth look at these companies’ shareholder-friendly initiatives.
GATXannounced a hike in its dividend payout. GATX’s board of directors announced a dividend hike of almost 5.5%, thereby raising its quarterly cash dividend from 55 cents per share to 58 cents. The raised dividend will be paid out on Mar 31, 2024, to all its shareholders of record as of Mar 1, 2024. The move reflects GATX’s intention to utilize free cash to enhance its shareholders’ returns.
GATX, which has been paying regular dividends since 1919, holds an impressive record with respect to dividends. Notably, 2024 marks the 106th consecutive year of GATX paying out dividends.
On Jan 23, 2024, Canadian National Railway’s board of directors approved a 7% hike in the 2024 dividendon the company's common shares outstanding and the repurchase of its shares per a new normal course issuer bid (Bid).
FDXinked an accelerated share repurchase (ASR) deal with Mizuho Markets Americas LLC to repurchase $1.0 billion of FedEx’s common stock. The transaction is part of the company’s previously announced share repurchase program.
Per the ASR agreement, FDX will pay $1.0 billion to Mizuho and receive an initial share delivery of almost 3.2 million shares on Dec 28, 2023. The remaining shares, if any, will be delivered by Feb 29, 2024. The number of shares purchased by FedEx will depend on an average of the volume-weighted average prices of FedEx’s common stock during the tenure of the ASR agreement, less a discount.
On Dec 6, 2023, Trinity’s board of directors increased its quarterly cash dividendby almost 8%, from 26 cents per share to 28 cents. The raised dividend, reflecting TRN’s 239th consecutively paid dividend, will be paid out on Jan 31, 2024, to all its shareholders of record as of Jan 12, 2024.
Concurrent with the fourth-quarter 2023 earnings release on Jan 19, 2024, J.B. Hunt’s board of directors has approved a dividend hike of 2%, thereby raising its quarterly cash dividend from 42 cents per share to 43 cents. The raised dividend will be paid out on Feb 23, 2024, to all its shareholders of record as of Feb 9, 2024.
On Dec 5, 2023, Landstar’s board of directors raised the number of shares of its common stock, which the company is authorized to purchase, to 3,000,000. The latest uptick allows the company to purchase 319,332 new shares, apart from the existing authorization to purchase 2,680,668 shares.
Additionally, LSTR’s board has declared a special one-time cash dividend of $2.00 per share. This special dividend will be paid on Jan 19, 2024, to all its shareholders of record as of business on Jan 3, 2024.
On Nov 3, 2023, Air Lease’s board of directors increased its quarterly cash dividend by 5% from 20 cents per share to 21 cents. The raised quarterly dividend of 21 cents per share will be paid on Jan 10, 2024, to shareholders of record as of Dec 15, 2023.
We believe such shareholder-friendly initiatives boost investor confidence and positively impact the company’s bottom line.
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Canadian National Railway Company (CNI) : Free Stock Analysis Report
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
Air Lease Corporation (AL) : Free Stock Analysis Report
Trinity Industries, Inc. (TRN) : Free Stock Analysis Report
Landstar System, Inc. (LSTR) : Free Stock Analysis Report
GATX Corporation (GATX) : Free Stock Analysis Report
