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Union Pacific (UNP) Strong on Dividends and Share Buybacks

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Union Pacific Corporation (UNP - Free Report) , one of the leading railroad companies in the United States, is making an all-out effort to reward its shareholders. Earlier this month, the company announced a 10% hike in its quarterly dividend to reach $1.07 per share (annually: $4.28 per share).

More recently, Union Pacific, currently carrying a Zacks Rank #3 (Hold), entered into accelerated buyback programs (ASRs) for $2 billion of its shares of common stock. Notably, 7.2 million shares of common stock bought back under the accelerated authorizations were received by the railroad operator on May 26, 2021.

Notably, Union Pacific anticipates share repurchases worth of roughly $6 billion in 2021. Additionally, the company expects a dividend payout ratio in the 40-45% (of earnings) band for the ongoing year. Its strong free cash flow generating abilities are supporting its shareholder-friendly activities.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, Union Pacific's efforts to control costs in this period of tepid revenues are praiseworthy too. Moreover, the company like other U.S.-based railroad operators, namely CSX Corp. (CSX - Free Report) , Norfolk Southern Corp. (NSC - Free Report) and Kansas City Southern is benefiting from an improved freight scenario in the United States.

However, tepid automotive demand is a concern for the company. In fact, this softness will likely persist in the near term as well. Moreover, a high debt/EBITDA ratio at Union Pacific is worrisome, which often indicates a firm’s inefficiency in servicing its debt appropriately.

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