(Source: Kansas City Southern press release, November 12, 2019)
KANSAS CITY, Mo. — Kansas City Southern (KCS) announced that its Board of Directors approved a new capital allocation policy. Under this new policy, the Company 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, the Company 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.
In connection with this new policy, the Board also approved the following actions:
• An increase in the quarterly dividend on KCS’s common stock from $0.36 to $0.40 per share. The board declared a common stock dividend for this increased amount payable on January 22, 2020, to stockholders of record at the close of business on December 31, 2019, and
• A new $2.0 billion share repurchase program, expiring December 31, 2022. This new program replaces the $800 million stock repurchase announced in 2017 under which the Company purchased approximately $741 million of Company stock.
“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,” stated president and CEO 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.”
The directors 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 21, 2020, to stockholders of record at the close of business on December 31, 2019.