Union Pacific’s dividend
Among Union Pacific’s (UNP) key strategies, it uses regular dividend payments to enhance shareholders’ return. On May 16, Union Pacific declared a dividend of $0.88 per share for the second quarter. The dividend will be payable on June 28 to shareholders of record as of May 31.
Union Pacific has a strong history of paying a regular dividend for over 120 years. In the last five years, the company has raised its dividend six times. Since June 2014, the company’s quarterly dividend rate has almost doubled from $0.455 per share to $0.88 per share in February.
The company’s last quarterly dividend hike was announced on February 7. Union Pacific raised the dividend 10% to $0.88 per share from $0.80 paid in November 2018. Last year, Union Pacific paid a dividend of $2.3 billion to its shareholders—compared to $2 billion in 2017. During the first quarter, the company paid dividends of $626 million.
Dividend yield and payout
Union Pacific has the highest dividend yield among US Class I railroad companies. The company has a yield of 2%—compared to the transportation sector’s average yield of 1.7%. CSX (CSX), Norfolk Southern (NSC), and Kansas City Southern (KSU) have dividend yields of 1.2%, 1.7%, and 1.2%, respectively.
Union Pacific’s dividend payout ratio of 38.5% is the highest ratio among its peers. CSX, Norfolk Southern, and Kansas City Southern have dividend payout ratios of 22.7%, 31.7%, and 24.2%, respectively. Previously, Union Pacific said that it intends to keep its dividend payout ratio between 40% and 45%. The company might announce another dividend hike to meet its targeted shareholders’ return goal.
To get exposure to the US railroad industry, investors could consider the iShares Transportation Average ETF (IYT). IYT tracks the performances of transportation stocks in the Dow Jones Industrial Average. IYT has returned 15.7% YTD. The ETF has outperformed the Dow Jones and the S&P 500, which have risen 10.9% and 14.7%, respectively.