Union Pacific (UNP, Financial) reported a quarterly dividend of 60.5 cents on Nov. 17.
The dividend is an increase of 5.5 cents or 10%. The ex-dividend date is Nov. 28, and the payable date is Dec. 29.
Union Pacific has paid a quarterly dividend for over 15 years. In the last five years it has an annualized dividend growth rate of 27.42%. The stock currently has a forward dividend yield of 2.41%.
The railroad company provides supply chain transportation in the Western U.S. with service in 23 states. In the third quarter, the company reported revenue of $5.2 billion, a decrease of 7% from the comparable quarter. Revenue for the year is also lower at $14.8 billion, a decrease of 11% from 2015. Revenue has been trending below the company’s three-year annualized revenue growth rate of 1.39%.
Profitability has also slowed. In the third quarter the company reported earnings per share of $1.36, a decrease of 9% from the comparable quarter. For the year, earnings per share are $3.68, a decrease of 12% from 2015. Over the last three years, the company has an annualized earnings per share growth rate of 9.86%.
In the railroad sector, volumes have been trending lower, and the industry’s focus has been on more efficiently managing costs. For 2016 analysts predict a revenue growth rate for Union Pacific of -8% and an earnings per share growth rate of -7%.
While earnings have been trending lower the company still has paid a steady dividend and continues to generate high levels of cash flow for future dividends. In 2016, Union Pacific had cash and cash equivalents of $1.9 billion, an increase of 12% from 2015. Free cash flow through the third quarter is also 1.5 times higher than 2015 at $1.3 billion.
The majority of analysts have a hold rating on the stock. Currently selling at $101.30, the stock's high target price has been set at $110 by analysts.
Disclosure: I do not own any shares of Union Pacific.
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