CSX: Reinvest in Rails

07/15/2014 7:00 am EST


David Fish

Executive Editor, Moneypaper

What if they had a correction and nobody came? We have been hearing predictions of a stock market correction of 10% or more since at least 2011, but it hasn't happened yet, observes David Fish in MoneyPaper.

Of course, those prognostications will eventually be right, but most likely will come true when least expected. Whenever it happens, it would be a good idea to remember that such events, just like recessions, are always temporary.

They come and they go, and the primary way that investors lose is if they let their emotions get the better of them by selling at depressed prices.

Steadily accumulating shares for the long-term overcomes the fleeting doom and gloom, whether real or imagined, given sufficient time and patience.

Meanwhile, we continue to focus on high quality dividend-paying stocks. Our featured stock, CSX Corp. (CSX) provides rail, intermodal, and rail-to-truck transport services over 21,000 route miles in 23 states and two Canadian provinces, connecting the eastern seaboard to the Midwest, Southeast, and Canada.

Its principal freight includes coal, fertilizer, chemicals, automobiles, metals, and agricultural products. Its fleet includes 4,000 locomotives and more than 200,000 rail cars.

In 2013, CSX earned $1.83 per share and revenues exceeded $12 billion. Consensus estimates call for it to earn about $1.86 per share this year and $2.12 in 2015.

CSX has reduced the number of outstanding shares from 1.31 billion at the end of 2006 to 1.004 billion today, of which Capital Research owns 8.7% and Vanguard owns 4.8%.

The annual dividend has been increased for ten straight years, to 64 cents per share, providing a 2.1% yield, but has plenty of room for growth, as it represents only about 36% of earnings.

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