CSX Dividend History and Safety

Original post

CSX dividend history is long and it might make a great addition to an income portfolio. Let’s review the business, dividend history, and payout safety going forward.

Business Overview and Highlights

CSX is a $57 billion business. The company is based out of Jacksonville, Florida and it employs 24,000 people. Last year CSX pulled in $11 billion in sales and that works out to $475,000 per employee.

The company runs within the industrial sector and maintains a solid credit rating (BBB+) from the S&P. This allows CSX to issue investment grade debt to build the business and finance other initiatives like its dividend…

CSX Dividend History 10 Years

The company paid investors $0.2567 per share a decade ago. Over the last 10 years, the CSX dividend has climbed to $0.78. That’s a 204% increase and you can see the annual changes below…

CSX Dividend History 10 Years

The compound annual growth is 11.8% over 10 years… but over the last year, the dividend climbed 8.3%. The slowdown in dividend growth isn’t a great sign. Although, CSX still might be a good income investment. Let’s review the dividend yield…

CSX Current Dividend Yield vs. 10-Year Average

CSX’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital, and we’ll look at that soon.

The dividend yield comes in at 1.29% and that’s about half of its 10-year average of 2.34%. The chart below shows the dividend yield over the last 10 years…

CSX Dividend Yield History

The lower yield shows that investors have bid up the company’s market value. They might be expecting higher growth and payouts. But more often than not, the dividend yield is mean reverting with share price changes.

Improved CSX Dividend Safety Check

Many investors look at the payout ratio to determine dividend safety. They look at the dividend per share divided by the net income per share. So a payout ratio of 60% would mean that for every $1 CSX earns, it pays investors $0.60.

The payout ratio is a good indicator of dividend safety… but accountants manipulate net income. They adjust for goodwill and other non-cash items. A better metric is free cash flow.

Here’s CSX payout ratio based on free cash flow over the last 10 years…

CSX Dividend Safety - Payout History

The ratio is volatile over the last 10 years and the trend is up. The last reported year shows a payout ratio of 49.6%. This gives room for CSX’s board of directors to raise the dividend.

The CSX dividend is safe for now but the dividend yield is near historical lows so you might want to shop for better dividend stocks in the current market.

If you’re interested in seeing more dividend research, please comment below. You can also check out our free dividend calculator.

Good investing,

Robert

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