Dividends and US rail freight loads in decline

If you listen to old songs, there are a number about railroads and until the growth of the passenger car interstate system, railroads were king. Both for freight and passenger service, over the years passenger service went to Amtrack and the railroads kept freight. Given the concentration of the railroad companies, Warren Buffett is a large shareholder of the railroad companies. Thus, freight volumes on North American railways signal the strength or weakness of the economy.

The American Association of Railroads (AAR) noted the number of freight carloads hauled by US rail companies has declined every month for the past 7 months. John Gray, AAR’s senior VP said portion of the economy which generates freight – manufacturing and goods trading has weakened significant.

The AAR tracks 11 categories of goods and only sector is up -petroleum related products are up 20%. With the fracking, companies send oil on railcars until a pipeline can be built. Overall traffic is down 3.3% and the President’s favorite product of coal is down 6%.

The trade war has caused grain shipments to be down 5.5%

Besides the trade war, the slowing economy, floods in the Midwest up and down the Mississippi river system, as well as a shift among US carriers to shed customers as they move to precision railroading.

42% of rail traffic is dependent upon trade. The AAR is hoping the USMCA or US-Mexico-Canada trade deal is signed by Congress soon.

Linking to dividend paying stocks, as the economy is seen slowing, it is good to be in defensive stocks or ones that have been consistently profitable and pay dividedns as the years go by. While we all have a bias towards growth, sometimes being defensive is the best strategy or until after the election when trade deals are sorted out.

There are more questions than answers, till the next time – to raising questions.

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