Kansas City Southern Dividend Stock Analysis

Kansas City Southern (KSU) is the smallest of the North American Class 1 railroad companies. The company commands 6,500 miles of rail network serving southern US with seamless cross-border service to Mexico. The company serves 12 Gulf ports and 1 Pacific Ocean port. The following system map image demonstrates the scale and reach of Kansas City Southern.

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(Image Source: Kansas City Southern IR)
Kansas City Southern own 100% of subsidiary Kansas City Southern de México, S.A. de C.V. (“KCSM”), which has a 50-year concession from the Mexican government and could expire in 2047 unless extended – to operate the KCSM arm. The company directly competes with Ferrocarril Mexicano, aka FerroMex (which is partly owned by Union Pacific) inside Mexico.

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Kansas City Southern – A Prime Target for Takeover

Kansas City Southern Inc (KSU) is the smallest of the North American railroad companies operating approximately 6,500 miles of rail network, serving business centers in south central US and Mexico.

The railroad industry is facing pressure to collapse in traffic in coal and petroleum products. This has caused companies to entertain the thought of M&A. KSU remains uniquely positioned with a great rail network and seamless access to the Mexican market – a region seeing higher industrial/manufacturing activity over the years in North America. A smaller company with a market cap of under $10B, makes KSU a great takeover target from any of the larger railroad operators. With a low starting yield of 1.5% and low payout ratio of 27%, there is plenty of room for those dividends to grow. Is this company a buy now?

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