CSX Corp., the parent company of CSX Transportation, announced it will split its stock, raise the dividend and buy back $2 billion in common shares.
That $2 billion share repurchase, which CSX said starts immediately and should be completed by the end of 2012, equals the amount of capital spending CSX plans for 2011 to upgrade its infrastructure.
The company will split its stock into three shares for each one held now for all shareholders of record at the May 31 close of business, with a distribution date of June 15. That will expand the number of shares to 1.8 billion from 600 million. Its new quarterly dividend will be 38 percent higher at 36 cents a share, or 12 cents on a post-split basis, payable June 15.
CSX shares have recently traded around $77 each, and as much as $80.
The CSX board authorized the company to start buying back shares immediately, under a program CSX expects to complete by the end of 2012. Under the program, the company may purchase shares from time to time on the open market, through block trades or otherwise.
“These actions reflect the success of CSX and its confidence in the future,” said Michael J. Ward, chairman, president and CEO. “They build upon the $2 billion investment CSX is making this year to meet the nation’s future transportation needs and drive long-term shareholder value.”
The moves come as activist shipper groups are pressing federal regulators to tighten their oversight of rail pricing and impose new competition rules on railroads. Some have complained that high profits by major railroads and such actions as share buybacks show carriers take in far more from freight rates than they need to keep up their networks and make a good return.
But railroads and their supporters have pushed back hard, arguing they need to earn profits strong enough to attract investors to their stocks and bonds, thereby keeping their debt interest rates low, and that they should reward investors through dividends or other steps to keep stock prices strong.
CSX generated a $395 million profit in the first quarter, up 30 percent from the 2010 period. That net income was 14.1 percent of revenue, up from a 12.2 percent profit margin a year earlier.