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Kansas City Southern announced today that its board approved updates to its capital allocation policy.
The new policy intends to continue deploying cash so that 40% to 50% will go to capital projects and strategic investments and 50% to 60% to share repurchases and dividends, KCS officials said in a press release.
Also, from time to time, KCS plans to use additional debt to support the revised policy and intends to increase its debt-to-EBITDA ratio.
The board also approved an increase in the quarterly dividend on KCS common stock from 40 cents to 44 cents per share; and a new $3 billion share repurchase program, which will expire Dec. 31, 2023.
"Kansas City Southern's revenue growth, margin improvement and cash flow generation this year have been remarkable given the economic and operational challenges we have faced," said President and Chief Executive Officer Patrick Ottensmeyer. "Our plan to prudently increase the amount of capital returned to shareholders demonstrates management's and our board's confidence in our strong growth prospects, ability to continue delivering on our long-range plan and the long-term efficiencies and lower capital spend intensity created by our precision scheduled railroading implementation."
The policy will continue to balance the company's objectives of delivering "meaning capital returns while investing in future growth opportunities and maintaining a desirable credit profile," Ottensmeyer added.