I am an enormous fan of the railroads, and I’m about to write a series of articles about all of the Class 1 rails, along with suppliers like Greenbrier (GBX), Stella Jones (OTC:STLJF) and others. In this first piece, I’m going to go through my reasons for suggesting that investors should wait for a better entry price on CSX Corporation (CSX). My model suggests that $45 to $50 would be a good entry price, and investors can make some money today by selling some LEAPs with strike prices in that neighborhood. I’ll go through my reasoning below by focusing on the financial and operational elements of the company, along with an analysis of the stock.
Financial Snapshot
There’s much to like about the financial history here, most particularly the dividend. The company has paid a decent and growing dividend for years, suggesting that management is very shareholder-friendly. For those interested in growth rates, the dividend per share has grown at a CAGR of about 5.9%, on the back of simultaneous rising dividend payments and falling share counts. Management friendliness is further demonstrated (in a somewhat muted fashion) with the share buybacks that have taken place over the past several years. In particular, since 2012, management has returned just over $9.2 billion to shareholders ($5.4 billion from stock buybacks, the balance in dividends). In my view, a shareholder-friendly management team is critical, as an unfriendly management almost guarantees a loss.
