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The Zacks Transportation - Rail industry continues to suffer from headwinds like raging inflation, higher interest rates, high fuel price and supply-chain disruptions.
Even though oil price has declined from its multi-year highs due to recession fears, it remains high. Notably, oil price was up 6.7% in the October-December period. Fuel expenses represent a key input cost for any transportation player. Operating expenses are on the way up, given the rise in fuel cost.
Partly due to these headwinds, the industry has declined 1.3% over the past six months, underperforming the S&P 500 Index’s 0.6% appreciation and 5.1% growth of the broader Zacks Transportation sector.
Despite the challenges surrounding the industry,some railroad companies like United Pacific Corp. and Norfolk Southern Corp. have consistently announced dividend hikes, thus highlighting their pro-shareholder stance.
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, they offer downside protection with their consistent increase in payouts.
Additionally, these companies have superior fundamentals like a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics.
How to Pick Stocks With Solid Dividend Payouts?
In order to choose some of the best dividend stocks from the aforementioned industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Each of the two stocks mentioned below carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
United Pacific: Headquartered in Omaha, NE, Union Pacific, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. Currently, it has a market capitalization of $127.26 billion.
UNP pays out a quarterly dividend of $1.30 ($5.20 annualized) per share, which gives it a 2.46% yield at the current stock price. This company’s payout ratio is 46% of its earnings at present. The five-year dividend growth rate is 12.37%. (Check United Pacific’s dividend history here).
We are impressed with Union Pacific’s consistent efforts to reward its shareholders through dividends and share repurchases. The company hiked its dividend twice in 2021. In May 2022, UNP’s board of directors increased its quarterly cash dividend by 10% to $1.30 per share. Notably, Union Pacific has been paying dividends on its common stock for 123 consecutive years. In 2022, UNP paid dividends worth $3,159 million and repurchased shares worth $6,282 million. For 2023, management anticipates a dividend payout of approximately 45% (of earnings).
Norfolk Southern: Headquartered in Atlanta, GA, Norfolk Southern engages in the rail transportation of raw materials, intermediate products and finished goods in the United States. Currently, it has a market capitalization of $51.34 billion.
NSC pays out a quarterly dividend of $1.35 ($5.40 annualized) per share, which gives it a 2.36% yield at the current stock price. This company’s payout ratio is 36% of its earnings at present. The five-year dividend growth rate is 11.84%. (Check Norfolk Southern’s dividend history here).
We are impressed with Norfolk Southern's efforts to reward its shareholders through dividends and share repurchases. In January 2023, the company's board announced a dividend hike of 9%, thereby raising its quarterly dividend payout from $1.24 per share to $1.35. During 2022, Norfolk Southern paid dividends worth $1,167 million and repurchased and retired common stock worth $3,110 million.
In 2021, Norfolk Southern paid dividends worth $1,028 million and repurchased and retired common stock worth $3,390 million. Norfolk Southern's strong free cash flow generating ability supports its shareholder-friendly activities. In 2022, the free cash flow was $2,274 million.
Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but also positively impact earnings per share.
Why Haven’t You Looked at Zacks' Top Stocks?
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights United Pacific and Norfolk Southern
For Immediate Release
Chicago, IL – March 6, 2023 – Today, Zacks Equity Research discusses United Pacific Corp. (UNP - Free Report) and Norfolk Southern Corp. (NSC - Free Report) .
Industry: Railroad
Link: https://www.zacks.com/stock/news/2061493/2-railroad-stocks-with-solid-dividend-yield-to-watch
The Zacks Transportation - Rail industry continues to suffer from headwinds like raging inflation, higher interest rates, high fuel price and supply-chain disruptions.
Even though oil price has declined from its multi-year highs due to recession fears, it remains high. Notably, oil price was up 6.7% in the October-December period. Fuel expenses represent a key input cost for any transportation player. Operating expenses are on the way up, given the rise in fuel cost.
Partly due to these headwinds, the industry has declined 1.3% over the past six months, underperforming the S&P 500 Index’s 0.6% appreciation and 5.1% growth of the broader Zacks Transportation sector.
Despite the challenges surrounding the industry,some railroad companies like United Pacific Corp. and Norfolk Southern Corp. have consistently announced dividend hikes, thus highlighting their pro-shareholder stance.
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market, and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, they offer downside protection with their consistent increase in payouts.
Additionally, these companies have superior fundamentals like a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics.
How to Pick Stocks With Solid Dividend Payouts?
In order to choose some of the best dividend stocks from the aforementioned industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Each of the two stocks mentioned below carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
United Pacific: Headquartered in Omaha, NE, Union Pacific, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. Currently, it has a market capitalization of $127.26 billion.
UNP pays out a quarterly dividend of $1.30 ($5.20 annualized) per share, which gives it a 2.46% yield at the current stock price. This company’s payout ratio is 46% of its earnings at present. The five-year dividend growth rate is 12.37%. (Check United Pacific’s dividend history here).
Union Pacific Corporation dividend-yield-ttm | Union Pacific Corporation Quote
We are impressed with Union Pacific’s consistent efforts to reward its shareholders through dividends and share repurchases. The company hiked its dividend twice in 2021. In May 2022, UNP’s board of directors increased its quarterly cash dividend by 10% to $1.30 per share. Notably, Union Pacific has been paying dividends on its common stock for 123 consecutive years. In 2022, UNP paid dividends worth $3,159 million and repurchased shares worth $6,282 million. For 2023, management anticipates a dividend payout of approximately 45% (of earnings).
Norfolk Southern: Headquartered in Atlanta, GA, Norfolk Southern engages in the rail transportation of raw materials, intermediate products and finished goods in the United States. Currently, it has a market capitalization of $51.34 billion.
NSC pays out a quarterly dividend of $1.35 ($5.40 annualized) per share, which gives it a 2.36% yield at the current stock price. This company’s payout ratio is 36% of its earnings at present. The five-year dividend growth rate is 11.84%. (Check Norfolk Southern’s dividend history here).
Norfolk Southern Corporation dividend-yield-ttm | Norfolk Southern Corporation Quote
We are impressed with Norfolk Southern's efforts to reward its shareholders through dividends and share repurchases. In January 2023, the company's board announced a dividend hike of 9%, thereby raising its quarterly dividend payout from $1.24 per share to $1.35. During 2022, Norfolk Southern paid dividends worth $1,167 million and repurchased and retired common stock worth $3,110 million.
In 2021, Norfolk Southern paid dividends worth $1,028 million and repurchased and retired common stock worth $3,390 million. Norfolk Southern's strong free cash flow generating ability supports its shareholder-friendly activities. In 2022, the free cash flow was $2,274 million.
Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but also positively impact earnings per share.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.