Kansas City Southern Announces Updated Capital Allocation Policy; Increases Dividend & Announces New $3B Share Repurchase Pro...
November 10 2020 - 8:00AM
Business Wire
Kansas City Southern (KCS) (NYSE: KSU) announced that its Board
of Directors approved updates to its capital allocation policy.
Under this updated policy, the Company intends to continue
deploying available cash in the following manner:
- Approximately 40-50% to capital projects and strategic
investments; and
- Approximately 50-60% to share repurchases and dividends.
In addition, from time to time, the Company also plans to
prudently use additional debt to support the revised policy and
intends to increase its Debt-to-EBITDA ratio to the mid-2x range,
consistent with its current ratings of BBB from Standard &
Poor’s and Fitch Ratings and Baa2 from Moody’s.
In connection with this updated policy, the Board also approved
the following actions:
- An increase in the quarterly dividend on KCS’s common stock
from $0.40 to $0.44 per share. The board declared a common stock
dividend for this increased amount payable on January 20, 2021, to
stockholders of record at the close of business on December 31,
2020. In April 2021, KCS will implement a quarterly dividend
approach that targets a low 20% range payout; and
- A new $3.0 billion share repurchase program, expiring December
31, 2023. This new program replaces the $2.0 billion stock
repurchase program announced in 2019 under which the Company has
purchased approximately $1.4 billion of Company stock, including
the $500 million accelerated share repurchase agreement that was
announced alongside our third quarter 2020 earnings.
“Kansas City Southern’s revenue growth, margin improvement and
cash flow generation this year have been remarkable given the
economic and operational challenges we have faced,” stated
President and Chief Executive Officer, Patrick J. Ottensmeyer. “Our
plan to prudently increase the amount of capital returned to
shareholders demonstrates management’s and our Board’s confidence
in our strong growth prospects, ability to continue delivering on
our long-range plan and the long-term operational efficiencies and
lower capital spend intensity created by our Precision Scheduled
Railroading implementation.”
“We believe today’s announcement continues to balance our
objectives of delivering meaningful capital returns while investing
in future growth opportunities and maintaining a desirable credit
profile.”
The Company’s Board also declared a regular dividend of $0.25
per share on the outstanding KCS 4% Non-Cumulative Preferred stock.
This dividend is payable on January 19, 2021, to stockholders of
record at the close of business on December 31, 2020.
Headquartered in Kansas City, Mo., Kansas City Southern (KCS)
(NYSE: KSU) is a transportation holding company that has railroad
investments in the U.S., Mexico and Panama. Its primary U.S.
holding is The Kansas City Southern Railway Company, serving the
central and south central U.S. Its international holdings include
Kansas City Southern de Mexico, S.A. de C.V., serving northeastern
and central Mexico and the port cities of Lázaro Cárdenas, Tampico
and Veracruz, and a 50 percent interest in Panama Canal Railway
Company, providing ocean-to-ocean freight and passenger service
along the Panama Canal. KCS' North American rail holdings and
strategic alliances with other North American rail partners are
primary components of a unique railway system, linking the
commercial and industrial centers of the U.S., Mexico and Canada.
More information about KCS can be found at www.kcsouthern.com
Forward-Looking Information
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934, as amended and
the Private Securities Litigation Reform Act of 1995. In addition,
management may make forward-looking statements orally or in other
writing, including, but not limited to, in press releases,
quarterly earnings calls, executive presentations, in the annual
report to stockholders and in other filings with the Securities and
Exchange Commission. Readers can usually identify these
forward-looking statements by the use of such words as "may,"
"will," "should," "likely," "plans," "projects," "expects,"
"anticipates," "believes" or similar words. These statements
involve a number of risks and uncertainties. Actual results could
materially differ from those anticipated by such forward-looking
statements as a result of a number of factors or combination of
factors including, but not limited: public health threats or
outbreaks of communicable diseases, such as the ongoing COVID-19
pandemic and its impact on KCS’s business, suppliers, consumers,
customers, employees and supply chains; rail accidents or other
incidents or accidents on KCS’s rail network or at KCS’s facilities
or customer facilities involving the release of hazardous
materials, including toxic inhalation hazards; legislative and
regulatory developments and disputes, including environmental
regulations; loss of the rail concession of Kansas City Southern’s
subsidiary, Kansas City Southern de México, S.A. de C.V.; domestic
and international economic, political and social conditions;
disruptions to the Company’s technology infrastructure, including
its computer systems; increased demand and traffic congestion; the
level of trade between the United States and Asia or Mexico;
fluctuations in the peso-dollar exchange rate; natural events such
as severe weather, hurricanes and floods; the outcome of claims and
litigation involving the Company or its subsidiaries; competition
and consolidation within the transportation industry; the business
environment in industries that produce and use items shipped by
rail; the termination of, or failure to renew, agreements with
customers, other railroads and third parties; fluctuation in prices
or availability of key materials, in particular diesel fuel; access
to capital; climate change and the market and regulatory responses
to climate change; dependency on certain key suppliers of core rail
equipment; changes in securities and capital markets;
unavailability of qualified personnel; labor difficulties,
including strikes and work stoppages; acts of terrorism or risk of
terrorist activities, war or other acts of violence; and other
factors affecting the operation of the business; and other risks
identified in this news release, in KCS's Annual Report on Form
10-K for the year ended December 31, 2019, and in other reports
filed by KCS with the Securities and Exchange Commission.
Forward-looking statements reflect the information only as of
the date on which they are made. KCS does not undertake any
obligation to update any forward-looking statements to reflect
future events, developments, or other information.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201110005407/en/
KCS: Ashley Thorne, 816-983-1530,
athorne@kcsouthern.com
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