Kansas City Southern’s (KCS) Board of Directors recently approved a new capital allocation policy, under which it intends to deploy 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, KCS also plans “to prudently use additional debt to support the new policy and intends to manage its Debt-to-EBITDA ratio in the low 2x range consistent with its current ratings of BBB from Standard & Poor’s and Fitch Ratings and Baa2 from Moody’s.”
The Board also approved the following actions:
- An increase in the quarterly dividend on KCS’s common stock from $.36 to $.40 per share. The Board declared a common stock dividend for this increased amount payable on Jan. 22, 2020, to stockholders of record at the close of business on Dec. 31, 2019.
- A new $2 billion share repurchase program, expiring Dec. 31, 2022. This new program replaces the $800 million stock repurchase announced in 2017 under which KCS purchased approximately $741 million of company stock.
The directors also declared a regular dividend of $.25 per share on the outstanding KCS 4% Non-Cumulative Preferred stock. This dividend is payable on Jan. 21, 2020, to stockholders of record at the close of business on Dec. 31, 2019.
“Kansas City Southern is pleased to announce a new capital allocation policy that balances our objectives of: a) investing in future growth opportunities; b) delivering meaningful capital returns to our shareholders; and c) maintaining a desirable credit profile,” said CEO and President Patrick Ottensmeyer. “This policy aligns very well with our corporate vision, which is to consistently be the fastest-growing, best-performing, most customer-focused transportation provider in North America.”