Union Pacific Corp's Dividend Analysis
Understanding the Dividend Dynamics of Union Pacific Corp
Union Pacific Corp (NYSE:UNP) recently announced a dividend of $1.3 per share, payable on 2023-12-28, with the ex-dividend date set for 2023-12-07. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Union Pacific Corp's dividend performance and assess its sustainability.
What Does Union Pacific Corp Do?
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Omaha, Nebraska-based Union Pacific is the largest public railroad in North America. Operating on more than 30,000 miles of track in the western two thirds of the U.S., UP generated $25 billion of revenue in 2022 by hauling coal, industrial products, intermodal containers, agriculture goods, chemicals, and automotive goods. UP owns about one fourth of Mexican railroad Ferromex and derives roughly 10% of its revenue hauling freight to and from Mexico.
A Glimpse at Union Pacific Corp's Dividend History
Union Pacific Corp has maintained a consistent dividend payment record since 1984. Dividends are currently distributed on a quarterly basis. Union Pacific Corp has increased its dividend each year since 1998. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 25 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Union Pacific Corp's Dividend Yield and Growth
As of today, Union Pacific Corp currently has a 12-month trailing dividend yield of 2.27% and a 12-month forward dividend yield of 2.27%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, Union Pacific Corp's annual dividend growth rate was 11.10%. Extended to a five-year horizon, this rate increased to 14.20% per year. And over the past decade, Union Pacific Corp's annual dividends per share growth rate stands at an impressive 14.40%.
Based on Union Pacific Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Union Pacific Corp stock as of today is approximately 4.41%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Union Pacific Corp's dividend payout ratio is 0.50.
Union Pacific Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Union Pacific Corp's profitability 9 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Union Pacific Corp's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Union Pacific Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Union Pacific Corp's revenue has increased by approximately 9.00% per year on average, a rate that outperforms approximately 58.89% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Union Pacific Corp's earnings increased by approximately 8.70% per year on average, a rate that outperforms approximately 46.36% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -1.60%, which outperforms approximately 27.57% of global competitors.
Next Steps
In conclusion, Union Pacific Corp demonstrates a strong dividend profile, with a history of consistent dividend growth and a solid payout ratio that speaks to its sustainability. The company's profitability and growth metrics further solidify its position as a reliable dividend payer. For value investors seeking to capitalize on dividend income, Union Pacific Corp presents an attractive opportunity, balancing steady returns with growth potential. As the company continues to navigate the complexities of the transportation sector, its strategic positioning and financial health suggest that it is well-equipped to maintain its dividend aristocrat status. Will Union Pacific Corp continue to be a cornerstone in dividend investors' portfolios? Only time will tell, but the current analysis provides a promising outlook.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
