CSX Rides On Dividends Amid Sluggish Revenues & High Debts
Zacks Investment Research | Mar 23, 2020 11:30PM ET
We recently issued an updated report on CSX Corporation (NASDAQ:CSX) . Factors like high debt levels, sluggish revenues and coronavirus-related woes are setbacks for the company. However, its shareholder-friendly measures and cost-cut initiatives are aiding growth.
Its operating expenses declined 6% and operating ratio (operating expenses as a percentage of revenues) improved to 58.4% during 2019. Notably, lower the value of this key metric, the better.
The company’s shareholder-friendly measures through dividend payments and buybacks are encouraging. This February, it announced an 8% dividend hike to 26 cents per share. In January 2019, the company’s board cleared a new $5-billion share buyback program, following early completion of the previous one. Moreover, adjusted free cash flow increased 9% year over year to $3.5 billion in 2019. This reflects CSX's robust cash generating capabilities.
The expansion of its intermodal service in order to provide customers with a faster and more efficient solution is noteworthy. ROE (expressed as a percentage) for CSX is currently 27.5 compared with 18.5 for the S&P 500 Index, which implies that the company is efficient in utilizing its shareholders' funds.
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