Landstar System Inc.'s (NASDAQ: LSTR) board of directors has authorized the payment of a one-time special dividend of $2 per share.
2019 has not been kind to freight brokers, especially those with significant exposure to the dry van and flatbed markets like Landstar. Excess truck capacity along with softer industrial and manufacturing fundamentals have worked in tandem to drive spot truckload (TL) rates lower. Additionally, a multitude of new entrants — well-funded digital brokers as well as asset-based carriers — looking to carve out market share has resulted in net revenue compression for many incumbent brokers.
That didn't keep the asset-light third-party logistics provider from announcing that a special cash dividend of nearly $80 million in sum would be paid to shareholders on Jan. 24, 2020.
"Landstar's strong balance sheet and free cash flow generation enables us to continue to return value to our stockholders through a significant increase to our stock purchase program coupled with a special dividend," said Landstar President and CEO Jim Gattoni.
At the end of the third quarter of 2019, Landstar reported $316 million in cash and short-term investments along with $216 million in available borrowing under its senior credit facility.
Landstar does not have a history of making acquisitions, leaving dividends and share repurchases as primary methods of returning cash flow generated from operations to its shareholders.
Landstar's balance sheet is under-levered. The company has a total of $100 million in debt, which places its leverage ratios — materially less than 1x debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) and 14% debt-to-capital — in an enviable state.
With minimal debt and capital expenditure requirements, the company's payment of dividends, both special and its regular quarterly dividend of $0.185 per share, remains a significant means of returning shareholder value.
In fact, Landstar has a history of declaring special dividends in December. The company declared a $1.50-per-share special dividend at the end of 2017, $1 in 2014, $0.35 in 2013 and $0.50 in 2012.
Landstar's announcement follows other special dividend announcements this year.
Truck manufacturer Paccar Inc. (NASDAQ: PCAR) announced a $2.30-per-share special dividend today, Dec. 10. Temperature-controlled truckload carrier Marten Transport (NASDAQ: MRTN) announced a $0.65 special dividend in August, and dry van carrier Werner Enterprises, Inc. (NASDAQ: WERN) announced a $3.75-per-share one-time payment in May.
Landstar also announced that the board increased the number of shares available for repurchase to 3 million. Prior to the announcement, the number of shares available under the stock purchase program stood at 1.15 million.
The company plans to continue to use free cash flow to repurchase shares of common stock.
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