Investors shouldn't expect mature American railroad firms to
light up IBD's stock market tables with stellar ratings and
bright, shiny growth. After all, some of these businesses precede
the Civil War (1861-1865).
For the income investor, however, there's plenty to
This column's mission is to help readers discover and profit
from stocks that show a sound business model, reliable earnings,
good cash flows, a rising cash dividend, and high potential for
Jacksonville, Fla.-basedCSX (
), founded in 1827, appears to meet these criteria.
The stock is up 39% since Jan. 1, beating a 26% gain for the
large-cap S&P 500. Despite a few mild pullbacks, CSX is also
up from a 10-week cup-with-handle breakout at 25.89.
The major head wind for CSX today is the deteriorating coal
sector. Energy markets continue increasingly to favor natural
gas. To combat the decline, CSX sees the merchandise and
intermodal businesses as a counterbalance for continued
At the Baird Industrials Conference in Chicago last month, CFO
Fredrik Eliasson noted that these two businesses now make up more
than 80% of CSX's total volume. He said customers see the
"attractive economic value of converting freight from highway to
IBD's Transportation-Rail group, however, is lagging
Transport-Truck in terms of 12-month performance; the two are up
35% and 53% respectively.
CSX's 2.2% annual dividend yield is one of the lowest within
IBD's Dividend Leaders screen results. However, CSX is growing
its dividend sharply, up an estimated 19% on a trailing 12-month
basis over the past three to five years.
Revenue growth picked up in Q3, rising 4% vs. a 2% increase in
Q2. CSX gets an A in SMR Rating. It also earns an excellent
3-year Earnings Stability Factor of 5. Strong annual operating
cash flows weather the relatively high long-term debt to equity
ratio of 101%.