For his model portfolio, John Reese, editor of Validea, selects stocks based on the long-standing st...
DRIP Expert Rides the Rails with Norfolk Southern
08/14/2017 2:50 am EST
Headquartered in Norfolk, Virginia, Norfolk Southern Corporation (NSC) conducts rail transportation business, operating 36,200 miles and offering the largest intermodal network in eastern North America, notes Vita Nelson, editor of DirectInvesting.
NSC is considered a solid and well-diversified business with a wide economic moat and sustainable competitive advantage over rivals. The company also enjoys a solid management and corporate culture.
Consensus estimates call for the company to earn about $6.33 per share this year, up from $5.62 per share last year, and to go to about $7.01 per share next year. Norfolk has paid dividends to investors since 1901 and has increased its payments for 11 years.
During the past five years, it has increased its dividends at an average rate of 5.99%, with its quarterly payment of $0.61 currently providing a yield of 2.10%.
The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 39%, which means the company is paying out 39% of all its net income in dividends and is retaining a large percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is also 39%.
Its Price to Earnings ratio (a measure of valuation) of 18.6 is 7.9% below its industry average, its Price to Book ratio of 2.6 is 25.7% below its industry average, its Price to Sales ratio of 3.3 is 10.8% below its industry average and its Debt to Equity ratio of 0.7 is 12.5% below its industry average.
Technically, NSC also looks attractive, trading 8.8% below its all-time high, while it is forming a five-month price consolidation pattern between $109 and $125 approximately, in which $109 is acting as a technical support level.
With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who have a long-term investment horizon.
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