Saturday, 1 December 2012

A Look at CSX Corp.


I’ve been holding out on CSX for a better price. I would like to initiate a position if the stock were to drop below $18.50. Here’s why:

Average Dividend Yield Analysis*

CSX
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2003
$6.05
$4.25
$0.0167
$0.0167
$0.0167
$0.0167
$0.067
1.57%
1.10%
2004
$6.74
$4.80
$0.0167
$0.0167
$0.0167
$0.0167
$0.067
1.39%
0.99%
2005
$8.60
$6.15
$0.0167
$0.0167
$0.0167
$0.0217
$0.072
1.17%
0.83%
2006
$12.77
$8.10
$0.0217
$0.0217
$0.0333
$0.0333
$0.110
1.36%
0.86%
2007
$17.29
$11.17
$0.04
$0.04
$0.05
$0.05
$0.180
1.61%
1.04%
2008
$23.57
$10.00
$0.05
$0.06
$0.0733
$0.0733
$0.257
2.57%
1.09%
2009
$16.93
$6.90
$0.0733
$0.0733
$0.0733
$0.0733
$0.293
4.25%
1.73%
2010
$21.60
$14.02
$0.08
$0.08
$0.08
$0.08667
$0.327
2.33%
1.51%
2011
$27.06
$17.69
$0.08667
$0.120
$0.120
$0.120
$0.447
2.52%
1.65%
2012


$0.120
$0.140
$0.140
$0.140
$0.540


2013


$0.140
$0.140
$0.140
$0.140
$0.560


Stock prices and dividends are per calendar year.
9y ave
2.09%
1.20%
Dividends are recorded in the quarter they were paid.
5y ave
2.66%
1.41%







3y ave
3.04%
1.63%







5y
$21.08
$39.85







3y
$18.45
$34.32






Super Cheap
$13.17


The table shows the 3 year average dividend yield to be 3.04% ((4.25% + 2.33% + 2.52%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $0.56, one would have to pay $18.45 for a 3.04% yield.

Buying the stock at its low in 2009 would have earned you an initial yield of 4.25%. Using the current annual dividend, that corresponds to a stock price of $13.17 today (see “super cheap” price in the table above).

Graham Price

CSX’s 2009, 2010 and 2011 EPS were $0.96, $1.35 and $1.67. 3Y Ave EPS = $1.33.
CSX’s BV is $8.74.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $16.15

Cyclically Adjusted Price to Earnings Ratio

CSX’s 10Y Ave EPS = $0.83
CAPE = Stock Price / 10Y Ave EPS = $19.76 / $0.83 = 23.8
A CAPE below 20 is good.

Conclusion

CSX has increased EPS from $0.37 in 2002 to $1.67 in 2011. That’s an increase of 4.5 times over 9 years.

Based on my three metrics, the stock price of CSX is not yet attractive. I will consider initiating a position if the stock price falls below $18.50.


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.


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