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CSX Corp. Dividend Stock Analysis 2016


CSX is the third largest railroad in N.America operating 21,000 miles of rail network.

CSX is a Dividend Contender having raised dividends for 11 consecutive years. Chowder Rule number: 19.07.

While some sectors see some temporary pressure due to collapse in commodity prices, coal remains in a secular downtrend -- which makes 20% of CSX's revenue (in 2015).

CSX Corp. (NASDAQ:CSX) is the third largest publicly traded railroad company in North America. The company commands an impressive 21,000 miles of rail network. The following system map image demonstrates the scale and reach of CSX Corp.

(Image Source: CSX Corp IR)

CSX Corp operates and services the east coast of the US and directly competes with Norfolk Southern (NYSE:NSC). CSX Corp., however, has an advantage where it provides service to Florida, which NSC doesn't.

The Railroad Industry

Railroads are considered a wide moat industry, as it entails immense capital requirements and new entrants in the industry are almost unheard of. Railroads are the pulse of the economy. Whether transporting crude, lumber, merchandise, agricultural or industrial products, railroads are what keeps the economy moving. Railroads are often closely observed by economists and analysts to get a sense of how the overall economy is doing. It is also considered a leading indicator for any recessions or slowdowns.

Since the railroads play such a crucial part of the economy and provide excellent long term capital appreciation, while providing investors with increased dividends year after year, the industry has attracted some of the biggest high-profile billionaire investors in the US. Warren Buffett's Berkshire Hathaway (BRK.A)( BRK.B) took over Burlington Northern Santa Fe (BNSF) in 2009; Bill Gates' Cascade Investments LLC owns a 11.8% stake in Canadian National Railway (NYSE:CNI); and Bill Ackman's Pershing Square owned a 6.4% stake in Canadian Pacific (CP) -- which was recently sold and exited. Earlier this year, CP approached CSX Corp for a $20B+ merger, which would create an impressive network serving the continent, but the offer was rebuffed by CSX.

The following table provides an overview of the railroad industry comparing CSX with its competitors Union Pacific Corp (NYSE:UNP), Canadian National Railway, Norfolk Southern Corp., Canadian Pacific Railway, and Kansas City Southern (KSU).

(Image Source: Created by author. Data from Google Finance & FinViz)

Current Trends

Railways have played a crucial part in transporting everyday goods such as crude, lumber, merchandise, agricultural or industrial products. Over the past decade, the highest growth has come from crude oil...