Kansas City Southern Announces Dividend Hike & New Buyback

Kansas City Southern (NYSE:KSU) announced that its board of directors has approved of a new share repurchase program worth $800 million. Simultaneously, it increased its quarterly dividend in excess of 9%. Following the announcement, shares of the company have nudged up 1.28% to $106.33 at the close of business on Aug 15.

Twin Shareholder-Friendly Moves

The company raised its quarterly dividend to 36 cents per share (annualized $1.44 per share), representing an increase of 9.1% over the previous payout of 33 cents per share (annualized $1.32 per share). Sanctioned by the company’s board of directors, the dividend will be paid on Oct 4, 2017 to shareholders as of Sep 11. The dividend hike highlights the company’s commitment to create value for shareholders.

Additionally, the latest $800 million share buyback program marks another move by Kansas City Southern to add value to its stockholders. This new share repurchase plan replaces the company’s previously announced $500 million program in 2015, completed in the second quarter of 2017. The authorization also includes a $200 million Accelerated Share Repurchase program. The program is expected to be launched soon and anticipated to get complete by year-end. It also includes a $600 million open market purchase program, expiring on Jun 30, 2020.

Kansas City Southern will receive around 1.6 million shares repurchased under the Accelerated Share Repurchase program on Aug 16. The total number of shares repurchased under the program will be revealed upon final settlement.

The directors also announced a regular dividend of 25 cents per share on 4% of Kansas City Southern’s outstanding non-cumulative preferred stock. The amount will be paid on Oct 3, 2017 to shareholders as of Sep 11.

Zacks Rank & Key Picks

Kansas City Southern currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the Transportation sector are Canadian National Railway Company (NYSE:CNI) , Alstom (PA:ALSO) SA (OTC:ALSMY) and Canadian Pacific Railway Limited (NYSE:CP) . While Canadian National Railway sports a Zacks Rank #1 (Strong Buy), Alstom and Canadian Pacific Railway carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Canadian National Railway and Alstom have gained over 6% in the last three months, while Canadian Pacific Railway shares have gained more than 8% on a year-to-date basis.

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