Monday, March 21, 2016

Recent Buy: Union Pacific Corporation

March 18, 2016: Bought 30 shares of UNP at $85.09 per share.

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 my buy price of $85.09, the stock yields 2.59%.

I already own 26 UNP shares, which I transferred from my Scottrade account in December 2015. Adding 30 shares increases my holding to 56 shares. My cost basis is $88.98 and the average yield on cost is 2.47%.  

Below is a 5-year chart depicting my buy prices:

I like UNP for several reasons, including a strong dividend growth rate of nearly 20%! The company has paid dividends for 116 years in a row. Below is a 10-year chart showing dividends relative to earnings and free cash flow. The current dividend payout ratio is 40%.

Following is a table containing updated ratings of UNP from various sources:

 Morningstar Ratings (****-) Credit: A's DARS Rating  3.4/5 (Neutral)
 TheStreet Ratings Rating  Buy [B-]
 The Motley Fool's CAPS Rating  (*****)
 Thomson Reuters StockReport+ (8/10) Positive 
 S&P Capital IQ Stock Report Hold (***--) Quality: A+ 
 Zacks Rank (Style Scores*) 5-Strong Sell (VGM:D)
  †combined Value/Growth/Momentum score

Morningstar's fair value estimate of UNP is $95.00, whereas S&P Capital IQ calculates a fair value of $88.00. According to Tipranks, based on 11 ranked analysts offering 12-month price targets for UNP, the average price target is $85.70. Based on the median of these estimates ($88.00), I bought shares at a discount of 3.31%.

30 shares of UNP adds $66.00 to DivGro's projected annual dividend income. I've updated my portfolio to reflect this purchase.

Do you own shares of UNP? Do you think UNP is a good dividend growth prospect? Please share your comments below.


  1. Divgro,

    I don't yet own any piece of UNP even though I see their trains at least once a week (I live in Nebraska). They seem like a very well put together company and their dividend growth is awesome. Their yield is just right under what I generally like to load my portfolio with. I've got to keep my eye on getting my portfolio to a 4% average across the board before I load in on anything else under it. That being said, I think you've got a solid company that will eventually breach my threshold!

    -Dividend Reaper

    1. Thanks for reading and commenting, Dividend Reaper -- I agree UNP seems to be a good company. Although the recent dividend growth is amazing, I don't expect that to continue. However, UNP has been a dividend payer for more than a century! So I think its a great dividend paying stock to own. My preferred yield is 2.5% or higher, so I'm a little below that right now -- hoping to get it about 2.5% quickly with dividend growth.


  2. Way to grab more shares and average down your costs basis. UNP is a great company, one that we own in our family's dividend stocks portfolio. Its hard not to like a company with a 9-year steak of dividend increases, and one that Buffett has in his portfolio!

    Thanks for sharing the buy. AFFJ

    1. Thanks, AFFJ -- the 9-year streak of dividend increases and the fact that Buffet owns shares are great points in favor of UNP. What impresses me is the dividend payment history (more than 100 years!) even though there were freezes and a cut here and there in the past.

  3. I'm a bit disappointed that UNP didn't raise its dividend, but I'm happy that it keeps the dividend the same while the energy sector playing out.

    1. Agreed. I'm hoping that UNP will return to the "dividend growth ways" soon. As you say, I think the company is repositioning itself given the current situation in the energy sector. Thanks for visiting and commenting!

  4. Divgro,
    Nice way to average down on a solid stock. It has a nice track record for dividend increases.
    Keep it up and stay in touch.

    1. Thanks, LOMD -- agreed, UNP has a nice history of dividend increases. Thanks for reading and commenting!



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