East coast rail and intermodal carrier CSX Corporation (NASDAQ: CSX – $50.22) is gaining about 7% after it announced an 11% increase in its quarterly dividend, a new share repurchase program and strong financial guidance as it applies the Precision Scheduled Railroading model to its operations. This announcement follows yesterday’s respectable first quarter earnings report. Recent changes to the company’s operations have already begun to deliver strong returns and are expected to accelerate in the coming quarters. Given this momentum, the Board of Directors approved an increase in the quarterly dividend from $0.18 to $0.20. The new dividend, to yield 1.5%, is payable on June 15 to shareholders of record on May 31, 2017. In addition, the Board also approved a new $1 billion share repurchase program, which management expects to complete by the end of the first quarter of 2018. This follows the successful completion of CSX’s previous repurchase plan, during which the company bought back $2 billion worth of shares since April 2015.
In line with the company’s balanced approach in deploying capital, CSX now expects to invest $2.1 billion in 2017, including approximately $270 million for Positive Train Control. Of the investment, more than half will be used to sustain core infrastructure with the balance allocated to projects supporting profitable growth, efficiency initiatives and service improvements. Adjusting for restructuring charges in 2017, these actions are expected to drive a full-year operating ratio in the mid-60s, and earnings per share growth of around 25% to $2.26 per share. Analysts were looking for earnings in the vicinity of $2.08 per share. The company also expects free cash flow before dividends of around $1.5 billion.