Union Pacific (UNP) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in Omaha, Union Pacific (UNP) is a Transportation stock that has seen a price change of 14.94% so far this year. The railroad is currently shelling out a dividend of $1.38 per share, with a dividend yield of 2.08%. This compares to the Transportation - Rail industry's yield of 0.77% and the S&P 500's yield of 1.42%.
Looking at dividend growth, the company's current annualized dividend of $5.52 is up 1.5% from last year. Over the last 5 years, Union Pacific has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.19%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Union Pacific's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, UNP expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $12.54 per share, representing a year-over-year earnings growth rate of 7.55%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, UNP is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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Union Pacific Corporation (UNP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
