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The board of CSX Corporation (NASDAQ:CSX) has announced that the dividend on 14th of March will be increased to $0.13, which will be 8.3% higher than last year's payment of $0.12 which covered the same period. Based on this payment, the dividend yield for the company will be 1.4%, which is fairly typical for the industry.
Check out our latest analysis for CSX
CSX's Future Dividend Projections Appear Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, CSX's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 34.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.
CSX Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from $0.213 total annually to $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. CSX has impressed us by growing EPS at 5.2% per 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.
We Really Like CSX's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for CSX that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.