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Union Pacific Corp.

01/20/2014 5:00 am EST

Focus: INDUSTRIALS

Kelley Wright

Managing Editor, Investment Quality Trends

My top pick for 2014 links the Pacific Coast and Gulf Coast ports with the Midwest and eastern United States gateways, through a rail network of over 31,000 route miles, explains dividend and value investing expert Kelley Wright, editor of Investment Quality Trends.

Union Pacific Corp. (UNP) provides freight transportation services for a wide variety of products and industries, that includes agriculture, food and beverage, automotive parts and materials, finished vehicles, and industrial and construction materials and products.

More importantly, the company provides transportation services for the petrochemical industry, which includes industrial chemicals, plastics, crude oil, and liquid petroleum gases; fertilizers, soda ash, and energy products comprising coal and petroleum coke.

It is the transportation of crude oil and petroleum products that we believe will be the major driver of revenues for the company.

As energy production increases in North America, the lack of pipelines makes the UNP rail network the major transportation conduit to refineries and shipping ports.

UNP offers good historic value when the dividend yield is 2.30% or higher. Based on the current cash dividend of $3.16, a 2.30% dividend yield is realized at $137.

Trading recently around $166 per share, the stock is in its rising trend, and we doubt it will fall close to its Undervalue area. That being said, we believe the company still offers good long-term upside potential.

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