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Why Shares of American Railcar Industries, Inc. Popped Today

By Travis Hoium – Feb 20, 2014 at 2:19PM

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Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of American Railcar Industries (NASDAQ: ARII) jumped 14% today after the company reported earnings.

So what: Revenue fell 5.1% from a year ago to $197.2 million, partially due to a shift from direct sales of railcar shipments to leases. Net income was flat at $24.4 million, or $1.14 per share, but came in $0.14 ahead of estimates.  

Now what: What may have gotten investors even more excited than beaten estimates was the 60% increase in American Railcar's dividend to $0.40 per share this quarter. The move to leases instead of sales also appears to be going well, nearly doubling the fleet to 4,450 railcars in 2013. This isn't going to be a high-growth company, but at 14 times earnings and a 2.8% dividend yield, it's a solid pick for income investors.

Travis Hoium has no position in any stocks mentioned, and neither does The Motley Fool. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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