The Greenbrier Companies Offers 35% Dividend Growth Rate Over Past Four Years (GBX)

Featured Image Source: Greenbrier Companies Website, https://www.gbrx.com

The Greenbrier Companies, Inc. (NYSE:GBX) has had a volatile record of dividend increases and dividend cuts in the first two decades since the company started paying dividends.

However, over the past four years the company presented a steady annual dividend growth trend at an average growth rate of 35% per year. The company’s current 2.1% dividend yield might be on the lower end of the yield scale, but it is average for companies in the railroad industry.

While the company’s current share price is trading at the same level as it did 12 month ago, the company has doubled the share price since January 2016.

The Greenbrier Companies, Inc. will distribute its next dividend distribution on its May 16, 2018, pay date to all its shareholders of record prior to the ex-dividend date on April 24, 2018.

The Greenbrier Companies, Inc. (NYSE:GBX)

Founded in 1974 and headquartered in Lake Oswego, Oregon, the Greenbrier Companies, Inc. designs, manufactures and markets railroad freight cars in North America, South America and Europe, as well as marine vessels – mostly cargo barges – for the North American market. The company manufactures double-stack intermodal railcars, tanker cars, rail cars for the transportation of light vehicles, conventional freight railcars and marine vessels, including conventional deck barges, railcar barges and dump barges.

Additionally, the company offers railcar repair, maintenance and retrofitting services through a network of 30 repair shops in North America. The Leasing & Services segment offers railcar leases and fleet management services to a fleet of approximately 340,000 railcars.

The company boosted its upcoming $0.25 quarterly dividend distribution 8.7% over the previous period’s $0.23 quarterly payout. This new quarterly amount converts to a $1.00 annualized dividend distribution and currently yields 2.1%. The company’s current yield of 2.1% is in line with industry averages. Additionally, Greenbriar’s current 2.1% is comparable to yields of major railroad companies – Union Pacific (NYSE:UNP) 2.2%, Norfolk Southern (NYSE:NSC) 2.2% and CSX Corporation (NASDAQ:CSX) 1.6%.

As already indicated, the company’s dividend distributions have fluctuated wildly in the past and rarely have risen for more than two consecutive years. The company even suspended dividend payments completely between 2010 and 2013. However, the company has managed to boost its annual dividend payout four consecutive years since resuming dividend distributions in 2014. Over that time, the company enhanced its annual dividend amount 233% from $0.30 in 2014 to the current $1.00 annual payout. The average growth rate for the annual dividend payout since 2014 is 35% per year. Even with the fluctuations and dividend cuts, the company still managed to deliver an average growth rate of 9% per year over the past two decades.

The share price fell more than 70% between September 2014 and January 2016. However, the 2014 price peak occurred in the aftermath of crude oil prices spiking to the $100 level in mid-2011 and remaining at that level for several years. Attempting to find cost-efficient transportation, many companies decided to make the trade-off between the speed and accessibility of trucking in favor or the slower but cheaper rail transportation, including intermodal rail services. Intermodal rail service serves a substitute for long haul trucking by load trucking trailers and ocean freight containers at a hub and transporting the cargo cross-country to another hub.

This cargo transportation mode shift created a demand spike for railcars. The chart above shows how this increased demand drove the GBX share price to spike and then drop back to its normal trend level when crude oil price declined sharply in late 2014. The dashed trendline represents the share price’s average growth trend since January 2016 and the share price has been rising at the same pace since January 2017.

The company’s share price declined more than 12% in the first 90 days of the trailing 12-month period and reached its 52-week low of $41.85 on July 14, 2017. After bottoming out in mid-July 2017, the share price experienced several spikes and drops of approximately 10% but overall rose nearly 30% before reaching its 52-week high on December 18, 2017.

Since the end of February, the share price has declined more than 10% and closed on April 6, 2018, at $47.60, which was 12.2% below the 52-week high from mid-December 2017, virtually even with the share price from one year earlier, nearly 14% above the 52-week low from July 2017 and 110% higher than it was five years prior.

Because of the share price drop from the 2014 price spike, the company delivered a 12.4% total loss to its shareholders over the past three years. However, taking the share price spike out of consideration, the shareholders enjoyed a small total return of 5.8% for the current 12-month period and a total return of nearly 150% over the past five years.

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