Prospects of the Zacks Transportation – Rail industry’s participants are being weighed down by challenges like tariff-induced economic uncertainties, persistent inflation and concerns pertaining to lingering supply-chain disruptions. Geopolitical woes represent further challenges. Most industry players are looking to drive their bottom line amid the headwinds through cost reduction.
Partly due to these headwinds, the industry has declined 19.1% over the past year compared with the S&P 500 Index’s 2.3% loss. The broader Zacks Transportation sector has plunged 27.3% in the said time frame.
One-Year Price Performance
Image Source: Zacks Investment Research
Despite the challenges surrounding the industry, some railroad companies, such as Union Pacific Corporation (UNP – Free Report) ), Canadian National Railway Company (CNI – Free Report) and Norfolk Southern Corporation (NSC – Free Report) , have consistently paid dividends to their shareholders, thus highlighting their pro-shareholder stance.
Dividend growth stocks generally belong to mature companies, which are less susceptible to significant market swings, and act as a hedge against uncertainty-induced stock market volatility as is the case currently. They offer downside protection with their consistent increase in payouts.
Additionally, these companies generally have strong fundamentals, such as a sustainable business model, a long track of profitability, rising cash flows, good liquidity and a strong balance sheet.
How to Pick Stocks With Solid Dividend Payouts?
In order to choose some of the best dividend stocks from the aforementioned industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Each stock mentioned below presently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Union Pacific: Headquartered in Omaha, NE, Union Pacific, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. Currently, UNP has a market capitalization of $125.84 billion.
UNP pays out a quarterly dividend of $1.34 ($5.36 annualized) per share, which gives it a 2.55% yield at the current stock price. The company’s payout ratio is 48% of its earnings at present. The five-year dividend growth rate is 7.92%. (Check Union Pacific’s dividend history here).
Union Pacific Corporation Dividend Yield (TTM)
Union Pacific Corporation dividend-yield-ttm | Union Pacific Corporation Quote
UNP has paid dividends on its common stock for 125 consecutive years, reflecting its pro-shareholder approach. Union Pacific’s consistent initiatives to reward its shareholders through dividends and share repurchases look encouraging. In 2022, UNP paid dividends worth $3.16 billion and repurchased shares worth $6.28 billion. In 2023, the company returned $3.9 billion to its shareholders through dividends ($3.2 billion) and buybacks ($0.7 billion). During 2024, UNP paid $3.21 billion in dividends and repurchased shares worth $1.50 billion. Notably, management expects to buyback shares worth $4.0-$4.5 billion in 2025.
Canadian National: Based in Montreal, Canada, Canadian National is involved in the rail, intermodal, trucking, and marine transportation and logistics business in Canada and the United States. Currently, CNI has a market capitalization of $68.35 billion.
CNI’s quarterly dividend leads to $2.44 per share (annualized), which gives it a 2.58% yield at the current stock price. This company’s payout ratio is 46% of its earnings at present. The five-year dividend growth rate is 7.97%. (Check Canadian National’s dividend history here).
Canadian National Railway Company Dividend Yield (TTM)
Canadian National Railway Company dividend-yield-ttm | Canadian National Railway Company Quote
CNI’s consistent efforts to reward its shareholders via dividends and buybacks are encouraging and highlight the company’s financial strength. In 2022, CNI paid dividends of C$2.00 billion and repurchased shares worth C$4.71 billion. In 2023, CNI paid dividends of C$2.07 billion and repurchased shares worth C$4.55 billion. During 2024, CNI paid dividends of C$2.14 billion and repurchased shares worth C$2.60 billion.
Norfolk Southern: Headquartered in Atlanta, GA, Norfolk Southern engages in the rail transportation of raw materials, intermediate products and finished goods in the United States. Currently, NSC has a market capitalization of $51.30 billion.
NSC pays out a quarterly dividend of $1.35 ($5.40 annualized) per share, which gives it a 2.60% yield at the current stock price. This company’s payout ratio is 46% of its earnings at present. The five-year dividend growth rate is 9.44%. (Check Norfolk Southern’s dividend history here).
Norfolk Southern Corporation Dividend Yield (TTM)
Norfolk Southern Corporation dividend-yield-ttm | Norfolk Southern Corporation Quote
Norfolk Southern’s consistent initiatives to reward its shareholders look encouraging. During 2024, NSC paid dividends worth $1.22 billion. In 2023, the company paid dividends worth $1.23 billion and repurchased and retired common stock worth $622 million. During 2022, Norfolk Southern paid dividends worth $1.17 billion and repurchased and retired common stock worth $3.11 billion. Buybacks not only reduce the total outstanding share count, thereby increasing earnings per share but also signal management’s belief in the intrinsic value of the stock.
Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business.
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