Thursday, December 17, 2015

Recent Transfer: Union Pacific Corporation

Omaha, Nebraska-based Union Pacific Corporation (NYSE:UNP) operates through its principal operating company, Union Pacific Railroad Company. The company operates the largest public railroad in North America, with 32,000 miles of track linking 23 states in the western two-thirds of the United States. UNP hauls coal, industrial products, intermodal containers, agricultural goods, chemicals, and automotive products. UNP owns a quarter of Mexican railroad Ferromex. The company was founded in 1862.

UNP is a Dividend Challenger with a 9-year streak of annual dividend increases. The company pays quarterly dividends of 55¢ per share in the months of March, June, September and December. At the current price of about $78.10, the stock yields 2.82%.

UNP is the 10th stock that I'm transferring from my portfolio at Scottrade to DivGro.

So far, I've transferred Coca Cola (NYSE:KO), Proctor & Gamble (NYSE:PG), Kimberly-Clark (NYSE:KMB),AbbView (NYSE:ABBV), Dominion Resources (NYSE:D), W.P. Carey (NYSE:WPC), Toronto-Dominion Bank (NYSE:TD), Pfizer (NYSE:PFE) and Texas Instruments (NASDAQ:TXN).

In the process, I've added $879.73 to DivGro's projected annual dividend income and $1,276.52 in past dividends to DivGro's total dividend tally.

2014-02-18Bought: 12 shares of UNP at $89.55 per share:$1,074.64
2014-04-01 Dividend on 12 shares at 45.5¢ per share: $5.46
2014-07-01 Dividend on 12 shares at 45.5¢ per share: $5.46
2014-10-01 Dividend on 12 shares at 50.0¢ per share: $6.00
2015-01-02 Dividend on 12 shares at 50.0¢ per share: $6.00
2015-03-30 Dividend on 12 shares at 55.0¢ per share: $6.60
2015-06-30 Dividend on 12 shares at 55.0¢ per share: $6.60
2015-07-06 Bought: 14 shares of UNP at $96.81 per share: $1,355.32
2015-09-30Dividend on 26 shares at 55.0¢ per share: $14.30
 Total Capital Invested $2,429.96

Total Dividends Received:$50.42

With this transfer, DivGro's projected annual dividend income increases by $57.20.

The following chart shows a 2-year history of UNP's share price and indicates when I bought shares.
Note that I routinely include commissions in transactions, whereas the chart shows the share price without commissions.

Source: Scottrade

So far, my investment in UNP has been disappointing, with an annualized total loss of 14%.

Why UNP?

Here are some reasons I like UNP and why I decided to transfer the shares to DivGro:
  1. UNP has a 10-year dividend growth rate of nearly 20%!
  2. The company has paid dividends for 116 years in a row.
  3. Morningstar has a fair value estimate of $110 for the stock, which implies the stock is undervalued by 41%. 
  4. Compared with trucking, shipping by rail is less expensive for long distances and up to 4 times more fuel-efficient per ton-mile shipped.
  5. UNP produced $3 billion of free cash flow in 2014, or $1.8 billion after paying $1.6 billion in dividends.
Do you own shares of UNP? Do you think UNP is a good dividend growth prospect? Please share your comments below.


  1. Nice transfer here! I like UNP and I agree that the price is very reasonable. It really took a beating this last few months. I am slowly growing my position and will definitely add more in the coming months.

    1. Hi D4s -- thanks for visiting and commenting. Indeed, UNP has really taken it on the chin this year. There are concerns about UNP's reliance on transporting coal. But the company seems to be agile enough (for such a large company) to cut costs and to shift focus to transporting other goods. I don't expect that UNP will continue to raise dividends by about 20% every year, though. More modest increases are likely, but I'll be OK with that.


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