Union Pacific (NYSE:UNP) Has Announced That It Will Be Increasing Its Dividend To $1.34

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Union Pacific (NYSE:UNP) Has Announced That It Will Be Increasing Its Dividend To $1.34

Union Pacific Corporation (NYSE:UNP) has announced that it will be increasing its periodic dividend on the 30th of September to $1.34, which will be 3.1% higher than last year’s comparable payment amount of $1.30. This will take the dividend yield to an attractive 2.1%, providing a nice boost to shareholder returns.

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Union Pacific’s Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn’t mean much if it can’t be sustained. The last dividend was quite easily covered by Union Pacific’s earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 37.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

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historic-dividend

Union Pacific Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.58 in 2014, and the most recent fiscal year payment was $5.20. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is good to see that there has been strong dividend growth, and that there haven’t been any cuts for a long time.

The Dividend’s Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 5.0% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 5.0% per annum, and is paying out quite a lot of its earnings to shareholders. This isn’t bad in itself, but unless earnings growth pick up we wouldn’t expect dividends to grow either.

Union Pacific Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we’ve identified

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that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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