This Steady Industrial Staple is Calling ‘All Aboard’ for Expansion

CSX (NYSE: CSX) can trace its legacy back to the birth of America's railroad system, just after the turn of the 19th Century. Its original line covered a paltry 13 miles and was powered by horse-drawn rail cars.

Today, the train operator's network spans over 21,000 miles and weaves through 26 states, the District of Columbia, and two Canadian provinces: Quebec and Ontario.  

It has witnessed two world wars, pandemics, numerous presidents, and the dawn of the Industrial Revolution.

Throughout it all, CSX's locomotives have transported goods across the country via traditional rail service and, more recently, through the transportation of intermodal containers and trailers.

Goods transported include coal and new energy sources, such as biodiesel and ethanol, along with cars, chemicals, military equipment, and other consumer products.

Heritage aside, there's another reason this dividend stock deserves a place on your radar: broader consolidation in the freight industry means merger talks are on the table.  

This could see CSX significantly expanding its reach.

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Operational Overview and Recent Earnings

CSX released its Q2 earnings report on July 23, with its financials reflecting challenging market conditions but also demonstrating cost control measures and operational improvements.

Examples include reducing delays and cutting overtime costs.

The results largely aligned with expectations. Digging into the data further, operating income was down year-over-year, falling from $1.45 billion in 2024 to $1.28 billion this year. 

Net income was $829 million, or $0.44 per diluted share, compared to $963 million, or $0.49 per diluted share, in the same period last year. Revenue was $3.57 billion for the quarter, a decline of 3%. 

The EPS of $0.44 was 10% lower than the same period last year but represented a 29% increase on the previous quarter and beat analyst expectations by ~6%. 

CSX's president and chief executive officer, Joe Hinrichs, said the results reflected 'significant sequential improvements in network fluidity and cost efficiency' with the freight operator also focused on completing two major infrastructure projects.

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*This is a free resource from Zacks.com. Use of this material is subject to Zacks' Terms of Service.
*Past performance is no guarantee of future results. Investing involves risk. Nothing in this material is investment advice or a recommendation to buy, sell, or hold any security. Returns are based on hypothetical models with no transaction costs. The S&P 500 is an unmanaged index.

Merger Talks on the Table

Mergers aren't always good news, but with the right partner, this strategic play could enable CSX to evolve into a true coast-to-coast or North America–wide network. This would reduce reliance on interchange partners and further boost efficiency.

Integration with a Mexico- or West Coast–connected railroad could increase CSX’s intermodal volumes and enhance its appeal to shippers seeking seamless North American trade routes. 

Another hidden advantage? CSX currently runs around 1,848 trains per day.

An expansion would unlock additional capacity and extend routes, creating further growth opportunities and giving access to new markets.

That increase in capacity may boost CSX’s ability to compete with trucking and alternative freight methods—especially with rising fuel and labor costs affecting road freight.

It’s also worth noting that fewer players in the freight rail space could give CSX more pricing leverage, particularly in key lanes like agriculture, energy, and intermodal.

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Dividend Profile

CSX pays a 13-cent dividend with a forward payout ratio of 26.97%. It offers an annual yield of 1.46% and has increased its dividend every year for the last 21 years.

The dividend yield may not be the largest in your portfolio, but this is a low controversy stock with a corresponding low volatility.

Bear Case

Coal still accounts for ~15–20% of CSX's revenue, and export coal demand is softening due to global energy transitions, pricing pressures, and weak demand from Europe and Asia.

Broader commodity transport (e.g., grain, chemicals, lumber) is also susceptible to macro weakness, weather disruptions, and geopolitical tensions—cutting into carload volumes.

If coal continues its secular decline without sufficient offset from intermodal or automotive traffic, CSX’s top line could stagnate or decline.

Final Thoughts

For long-term dividend investors, CSX offers a compelling mix of income stability, operational strength, and future growth potential—making it a smart addition to an income-focused portfolio right now.

With a 21-year track record of consecutive dividend increases, a low payout ratio (~30%), and consistent free cash flow generation, CSX delivers reliable income with room for future hikes.

The current yield of ~1.5% may seem modest, but it’s backed by one of the most durable business models in U.S. infrastructure.

What sets CSX apart today is its strategic positioning for expansion.

Recent network upgrades, investments in intermodal capacity, and its integration with CPKC via the Meridian & Bigbee line give CSX a platform to benefit from growing North American trade and logistics shifts.

If industry consolidation gains traction, CSX could emerge as either a strong acquirer or a valuable partner—unlocking substantial shareholder value through synergies, enhanced pricing power, and broader market access.

At current valuation levels, investors get a high-quality dividend payer with upside optionality tied to potential mergers, freight volume recovery, and improved network efficiency.