Tensions pertaining to a trade war between the United States and China – the two largest economies – are showing no signs of easing. In fact, the impact of the tensions is increasing with each passing day with neither party showing any signs of relenting.
In fact, earlier this month, the nations imposed fresh duties on each other’s goods. While the U.S. administration slapped fresh 10% tariffs on Chinese products worth $200 billion, China retaliated with tariffs on U.S. goods worth $60 billion. In fact, the tariff exchanges might get more severe in the coming days. It could also trigger a deeper dispute between the two nations.
Trade wars are never beneficial as they eat into profit margins of companies, thereby crippling the overall economy. Highlighting the graveness of the situation, Jack Ma, the founder of Chinese e-commerce giant Alibaba, expressed concerns that the US-China trade war could last 20 years.
Trade war-related tensions apart, uncertainty pertaining to the NAFTA deal has also increased investors’ concern. Moreover, the ongoing troubles in emerging markets have also been a matter of worry for investors.
Given this backdrop, investing in companies that not only pay consistent dividends but also raise the same seems to be prudent. This is because such companies are mature and can generate steady cash flow irrespective of market conditions.
Dividend Paying Transport Stocks — A Prudent Choice
A sector that boasts stocks paying handsome dividends is transportation. Consistent dividend payouts underscore a company’s financial strength and stability.
Moreover, the new tax law (Tax Cuts and Jobs Act), which came into force late last year, is a boon for transport companies as far as shareholder-friendly activities like dividend payments are concerned. The significant reduction in corporate tax rate, under the new law, has boosted cash flow as well as earnings of transportation stocks.
Due to the significant reduction in tax bills, these companies have more cash to fund capital expenditures, buybacks and dividends among others.
Shareholder-Friendly Activities Likely to Pick Up Pace
As noted above, many stocks in the transportation space reward shareholders through dividend payments and buybacks. For instance, package delivery major FedEx Corporation FDX hiked its dividend payout by 30% in June. In another shareholder-friendly move, third-party logistics company C.H. Robinson Worldwide, Inc. CHRW boosted its buyback program in May.
We expect an uptick in such activities in the space going forward. Due to the significant reduction in their tax bills, more cash is expected to remain in the hands of these companies to fund their capital expenditures, acquisitions and share repurchases among others.
4 Dividend Paying Transportation Stocks
In view of the abovementioned tailwinds, we believe that stocks from the transportation space should be part of one’s portfolio. Moreover, given the current market uncertainties, investing in dividend-paying companies seems practical as they provide steady earnings regardless of the state of the global equity market.
We have employed the Zacks Stocks Screener to find four top transportation companies that offer a decent dividend yield and carry a favorable Zacks Rank (#1 or #2). Also, they have raised their dividend payouts this year.
SkyWest, Inc. SKYW operates a regional airline in the United States. The Zacks Consensus Estimate for its current-year earnings has been revised upward to the tune of 3.1% in the past 60 days.
The company has a dividend yield of 0.7%. SkyWest increased its quarterly dividend payment by 25% to 10 cents per share (40 cents annualized) in February 2018. The stock, sporting a Zacks Rank #1 (Strong Buy), has gained 34.8% in a year’s timeagainst its industry’s decline of 2.6% in the period. You can see the complete list of today’s Zacks #1 Rank stocks here.
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CSX Corporation CSX provides rail-based transportation services in the United States and Canada. The Zacks Consensus Estimate for its current-year earnings has been revised upward to the tune of 1.4% in the past 60 days.
The company has a dividend yield of 1.2%. CSX hiked its quarterly dividend by 10% to 22 cents per share in February 2018. The stock, carrying a Zacks Rank #2 (Buy), has gained 36.7% in a year’s time,outperforming its industry’s rally of 27.8% in the period.
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Landstar System, Inc. LSTR, based in Jacksonville, FL, is an asset-light provider of integrated transportation management solutions. The Zacks Consensus Estimate for its current-year earnings has been revised upward to the tune of 2.2% in the past 60 days.
The company, which has a dividend yield of 0.5%, has increased its quarterly dividend twice so far this year. In January, it raised its dividend by 50% to 15 cents per share. The same was further increased to 16.5 cents in July, reflecting a hike of 10%. The stock, carrying a Zacks Rank #2, has gained 22% in a year’s time,outperforming its industry’s rally of 10.7% in the period.
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Triton International Limited TRTN, based in Hamilton, Bermuda, is the largest lessor of intermodal containers. The company also focuses on leasing chassis, which are used for transporting containers. The Zacks Consensus Estimate for its current-year earnings has been revised upward to the tune of 0.7% in the last 60 days.
The company, which boasts a dividend yield of 5.6%, hiked its quarterly dividend by 7 cents to 52 cents per share in May. The stock, carrying a Zacks Rank #2, has gained 12.2% in a year’s time,outperforming its industry’s rally of 10.5% in the period.
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