Dividend Investing Ideas Center
Have you ever wished for the safety of bonds, but the return potential...
Shauvik Haldar Nov 13, 2020
Kansas City Southern (KSU) is a transportation holding company with more than 6,500 miles of rail network spanning across the United States and Mexico.
It has two subsidiaries, with Kansas City Southern Railway Company operating as a Class I railroad company in the United States and Kansas City Southern de México, S.A. de C.V. operating as one of the largest regional railroad companies in Mexico.
The Kansas-based company derives almost 25% of its revenue from its chemical and petroleum segment. Industrial and consumer products, agriculture and minerals, intermodal, automotive and energy are the other segments.
After facing significant operational challenges in 2018, KSU implemented precision-scheduled railroading (PSR) in 2019, leading to significant improvement in network capacity, new business acquisitions and positive customer feedback.
Moving into a challenging 2020, KSU further leveraged its PSR-driven efficiency gains to improve its operating ratio – one of the key performance indicators for the industry – in Q3 2020. Despite significant decline in volumes in Q2 2020, KSU was able to hold onto its efficiency levels. As a result, when Q3 2020 presented a significant upswing in volumes, KSU was able to quickly act, leading to an improvement in its outlook for overall 2020. For instance, the company now expects to see a nearly 30% improvement in free cash flows in 2020 compared to 2019.
Naturally, it also made sense to reward shareholders. Recently KSU increased its quarterly dividend by 10% from 40 cents to 44 cents to be payable to shareholders of record as of December 31, 2020. A new share repurchase program of $3 billion was also announced, replacing the $2 billion share repurchase program of 2019.
Going forward, KSU expects to leverage its unique position to facilitate cross-border trade between the United States and Mexico, especially for refined energy products.
Want to keep track of all the dividend increases? Subscribe to Dividend.com and have complete access to our exclusive dividend increases list here.