Union Pacific (UNP) Could Be a Great Choice

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.Union Pacific in FocusBased in Omaha, Union Pacific (UNP) is in the Transportation sector, and so far this year, shares have seen a price change of -6.12%. The railroad is paying out a dividend of $1.34 per share at the moment, with a dividend yield of 2.5% compared to the Transportation - Rail industry's yield of 1.59% and the S&P 500's yield of 1.62%.Taking a look at the company's dividend growth, its current annualized dividend of $5.36 is up 1.5% from last year. Over the last 5 years, Union Pacific has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.92%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Union Pacific's current payout ratio is 48%, meaning it paid out 48% of its trailing 12-month EPS as dividend.UNP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $11.59 per share, representing a year-over-year earnings growth rate of 4.51%.Bottom LineFrom greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, UNP is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Union Pacific Corporation (UNP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks