J.B. Hunt Transport Services ( JBHT - Analyst Report ) recently announced that its board of directors has increased the quarterly cash dividend payment by 7.7% to 14 cents per share paid previously in 2011. This represents an annual dividend of 56 cents per share. The increased dividend will be paid on February 24 to shareholders of record on February 14.

Despite the ongoing upheaval in the truck market, J.B. Hunt continues to maintain its yearly growth in shareholder returns. The company paid quarterly dividends of 10 cents, 11 cents and 12 cents per share in 2008, 2009 and 2010, respectively. Further, it increased the quarterly dividend payment to 13 cents per share for 2011.

Besides dividend payment, the company also repurchased 6 million shares for a total cost of $246 million in fiscal 2011 and initiated a new share repurchase program of $500 million. As of December 31, 2011, the company had $503 million remaining in its share repurchase authorization.

We believe that the increasing returns to shareholders follows from stronger freight demand, thanks to the company’s diversified business model and improving price mix.

In the recently concluded fourth quarter of 2011, J.B. Hunt gave a superior earnings performance that surpassed the consensus estimate and grew approximately 23% from the year-ago level. The current growth trend in freight rates arising from a tighter truckload market along with the growing demand for intermodal and higher fuel surcharges remained the key growth drivers for the company.

However, volatility in fuel prices remains a key concern for J.B. Hunt. The company’s fuel surcharge revenue program enables it to recover the majority of fuel price hikes from customers. However, the company incurs costs when fuel price increases cannot be fully recovered due to engines being idled during cold or warm weather or due to empty or out-of-route miles that cannot be billed to customers.

Additionally, the changing environment in the trucking industry due to highway-to-rail conversion also has an adverse impact on the company’s truck segment. J.B. Hunt also remains exposed to competition from transportation and logistics companies like YRCW Worlwide ( YRCW - Snapshot Report ) and Con-Way Inc. ( CNW - Snapshot Report ) .

Consequently, we are maintaining our long-term Neutral recommendation on J.B. Hunt, with a Zacks Rank of #3 (Hold).