CSX Corporation's (NASDAQ:CSX) investors are due to receive a payment of $0.12 per share on 13th of September. This means that the annual payment will be 1.4% of the current stock price, which is in line with the average for the industry.
View our latest analysis for CSX
CSX's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, CSX was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 31.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.
CSX Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.20 in 2014, and the most recent fiscal year payment was $0.48. This means that it has been growing its distributions at 9.1% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
We Could See CSX's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that CSX has been growing its earnings per share at 6.2% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
CSX Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for CSX that investors should know about before committing capital to this stock. Is CSX not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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About NasdaqGS:CSX
Very undervalued established dividend payer.
