Norfolk Southern Dividend Stock Anlaysis

NSC

Norfolk Southern Corp (NSC) is the fifth largest publicly traded railroad company in North America. The company commands an impressive 20,000 miles of rail network serving 22 states and 40+ ports. The following system map image demonstrates the scale and reach of Norfolk Southern. Norfolk Southern operates and services the east coast of the US and directly competes with CSX Corp (CSX).

Railroads are the pulse of the economy. While crude shipments are on their way to a recovery thanks to the rise in oil prices, coal remains in a secular downtrend. NSC sees continued pressure as coal made 17% of total revenue opportunity in 2015. NSC expects further weakness as coal volumes continue to drop. This article provides a detailed stock analysis for Norfolk Southern Corp.

nsc-sws1

Continue Reading Here >

Sector Challenges – Railroads

Over the course of past few months, I have been featuring the Sector Overview series, where I take a sector (or an industry) and provide some basic/background information about the sector. In addition, I present the major companies in the field and profile at a high level comparing the peers. These articles are supposed to be what the title claims – an overview. It is up to each investor to compare and contrast individual companies and decide which one to pick if needed. These articles have garnered a lot of attention from readers (Thank you once again 🙂 ) and the feedback really helps me in making this a better blog for more quality articles. Lately, I have been thinking on the other side of these investment opportunities and decided to highlight the sectors to present the threats and challenges in current environment. I begin this series with a Sector Overview Challenges – Railroads.

The article Sector Overview – Railroads is available here. In that article, I explored the idea of investing in the railroad sector and presented the major railroad operators in N.America – which includes Union Pacific Corp (UNP), Canadian National Railway Co (CNI/CNR.TO), CSX Corp (CSX), Canadian Pacific Railway Ltd (CP), Norfolk Southern Corp (NSC), and Kansas City Southern Inc (KSU). In addition, there is Burlington Santa Fe (BNSF), but the company was bought by Warren Buffet’s Berkshire Hathaway and taken private.

Caveat: Before I get into the details of the challenges faced by the sector, I would like to highlight that this is by no means a recommendation to short the stocks. Remember each investment carries risk, and all I am trying to do with this article is to try and highlight the existing risks in current market conditions and during this part of the economic cycle. These conditions may disappear in due time as the economy goes through its ups and downs.

Continue reading

Sector Overview – Railroads

Fewer investments garner as much as attention to the pulse of the economy as the railroad sector. The railroads are considered a leading indicator for the overall health of the economy as transportation of goods is critical and gives investors a sense of how companies and consumers are spending their money. If we observe legendary investors such as Warren Buffett and Bill Gates – it is clear that they are fans of the railroad companies and believe in the long term prospects with Buffett’s Berkshire Hathaway buying out Burlington Santa Fe (BNSF), taking it private and Gates’ Cascade Investments holding a sizeable position in Canadian National Railway. Railroads are what we call a wide-moat industry sector – where it is extremely hard for new entrants to get established and challenge the incumbents. This makes the railroads very attractive for long term investors.

Whether transporting crude, lumber, merchandise, agricultural or industrial products, railroads are what keeps the economy moving. While the transportation for entities such as coal (which used to be the largest users of railroad services a few years ago) has fallen due to the fall in crude prices and rise of green energy alternatives, the transportation need for crude saw significant rise in the recent past. However, the recent turn of events with falling energy prices, has put a damper on crude transportation via railroads. The following chart from Association of American Railroads shows the trend in traffic for various payloads.

Continue reading

Norfolk Southern Dividend Stock Analysis

NSC

Norfolk Southern Corp. (NSC) is a class 1 railroad company that dominates the eastern continental US and commands approximately 20,000 miles of rail network in 22 states and the District of Columbia. The company is one of the key players in the transportation industry and provides a great investment opportunity for long-term investors. Norfolk Southern is a dividend contender, having raised dividends for 14 consecutive years, with a 5-year DGR of 10.3%. The current headwinds the crude industry is facing provides a good opportunity to initiate a position in this best-in-class starting yielder.

Continue reading here >