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CSX Corporation (NYSE:CSX), together with its subsidiaries, provides rail-based transportation services. The company offers traditional rail service, and the transport of intermodal containers and trailers. It transports crushed stone, sand and gravel, metal, phosphate, fertilizer, food, consumer, agricultural, automotive, paper, and chemical products; and utility, industrial, and export coal to electricity-generating power plants, steel manufacturers, industrial plants, and deep-water port facilities. CSX Corporation operates approximately 21,000 route mile rail network, which serves various population centers in 23 states east of the Mississippi River, the District of Columbia, and the Canadian provinces of Ontario and Quebec, as well as operates approximately 4,000 locomotives.

CSX is one of the largest railroad companies in the world. Its vast network allows it to have a monopoly-like status. Transportation by rail is not only cheap, but more efficient that using trucks due to larger storage capacity.

In the last three months, the stock has fallen, mainly because of the market downturn. It trades currently around $21. It has a forward P/E of 10.7. The dividend is 2.19% which is about average. I do see CSX has a dividend growth story. The company's payout ratio is less than 25%. There is plenty of room for growth.

The company is a cash cow generating billions in free cash flow every year. Management has a strong commitment to shareholders. This year the company announced a $2 billion share buyback program.

The best thing about many of these railroad companies is that they tend to operate in regions. This helps them overcome competition.

Union Pacific (NYSE:UNP) has a market cap of $45 billion. The company primarily operates on the West Coast, however it does have operations on the East Coast. CSX is the opposite with operations primarily on the East Coast.

Norfolk Southern (NYSE:NSC) has a market cap of $23 billion. I would consider this to be CSX's main competition. However, NSC's rail lines run from the East Coast to the Gulf Coast. CSX's rails run from East Coast and some go all the way up to Canada.

Railroads are a very cyclical business. They tend to be volatile relative to the general economy. However, even with the recent negativity, I believe the U.S. is still on track for an economic recovery. CSX is a great way to play that recovery. The company is very profitable. They are investing in their infrastructure. They have a great management team. As companies look to cut back on transportation cost due to higher gas prices, they will need a cheaper solution. Railroads would help corporations in these times. I believe CSX is poised to do well long-term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: CSX Corporation: Worth A Buy On The Dip