Headquartered in Omaha, Union Pacific Corporation (UNP) is the largest public railroad in North America, and one of the world’s largest transportation companies, notes dividend reinvesting expert Vita Nelson, editor of DirectInvesting.
It operates from West Coast and Gulf Coast ports to eastern gateways, connects with Canada's rail systems and serves approximately six Mexican gateways.
With a market cap of $110.8 billion, UNP a mega cap stock; its long history of consistent revenues and earnings growth makes it a solid company. It is considered a well diversified business with a wide economic moat and a durable competitive advantage over rivals, which enjoys a solid management and corporate culture.
Consensus estimates call for the company to earn about $7.76 per share this year, up from $5.79 per share last year, and to go to about $8.79 per share next year. Union Pacific has paid dividends to investors since 1900, and has increased its payments for eight consecutive years.
During the past five years it has increased its dividends at an average rate of 15.7%, and its quarterly payment of $0.73 per share currently provides a yield of 1.84%.
The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 19.2%, which means the company is paying out 19.2% of all its net income in dividends, and is retaining a large percentage of earnings to reinvest or grow the business.
For disclosure, contributing editor Mario Medina (co-manager of the MP 63 Fund) is a long-term investor of Union Pacific Corp., and his investing strategy is to invest small amounts periodically (also known as dollar-cost average or DCA), always with a long-term view.
