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Norfolk Southern (NSC) Cheers Investors With 10% Dividend Hike

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In a shareholder-friendly measure, Norfolk Southern Corporation (NSC - Free Report) announced a 10% increase in its quarterly dividend. The move underscores the company’s sound financial position and its commitment to reward shareholders.

Norfolk Southern raised its dividend by 10 cents to $1.09 per share (or $4.36 annually). The amount will be paid out to shareholders on Aug 20, of record as of Aug 9. The company has paid dividend for 156 consecutive quarters.

Norfolk Southern’s measures to reward its shareholders are noteworthy.  In 2020, the company returned $2,399 million to shareholders through a combination of dividends ($960 million) and share buybacks ($1,439 million) despite coronavirus-related woes. The company’s strong free cash flow generation capabilities support its shareholder-friendly activities. During 2020, Norfolk Southern generated free cash flow of $2.1 billion, up 14% year over year.

The latest dividend increase marks the company’s second such dividend hike this year. Previously, in January, the company’s board approved a 5% hike in its quarterly dividend. In first-quarter 2021, the company paid $840 million to its shareholders through dividends ($249 million) and buybacks ($591 million).

Norfolk Southern’s successive dividend hikes can be attributed to the significant improvement in its operations, as reflected in its second-quarter results. The company’s earnings of $3.28 per share not only surpassed the Zacks Consensus Estimate of $2.94, but also skyrocketed more than 100% year over year on higher revenues. The top line increased 34% year over year owing to 25% rise in volumes and a 7% increase in revenue per unit.

Investors always prefer an income-generating stock. Hence a high-dividend-yielding one is obviously much coveted. It goes without saying that stockholders are always on the lookout for companies with a track record of consistent and incremental dividend payments to put their money on.

Zacks Rank & Key Picks

Norfolk Southern carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Union Pacific Corporation (UNP - Free Report) , Expeditors International of Washington (EXPD - Free Report) and Matson (MATX - Free Report) . While Matson sports a Zacks Rank #1 (Strong Buy), Union Pacific and Expeditors carry a Zacks Rank #2 (Buy) each. You can see the complete list of today's Zacks #1 Rank stocks here.

Shares of Union Pacific, Expeditors and Matson have rallied more than 25%, 47% and 88% in a year’s time respectively.

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