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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *Union Pacific Corp. (UNP)....

Comparison UNP (recently recommended stock of the month) vs SP500 (by Vanguard SP500 Index Fund) in the last 10 years.

Company Information:

Incorporated in Utah in 1969 and headquartered in Omaha, Nebraska, Union Pacific Corporation (UNP) is the largest public railroad in North America, and one of the world’s largest transportation companies. Its business mix includes agricultural products, automotive, chemicals, coal, industrial products and intermodal. The Company operates from West Coast and Gulf Coast ports to eastern gateways, connects with Canada's rail systems and serves approximately six Mexican gateways.

 

Its current total market capitalization of $110.8 billion makes UNP a mega capitalization stock (a mega-cap stock has a market capitalization value of more than $100 billion) and its long history of consistent revenues and earnings growth makes it a solid company. It is considered a well diversified business with a wide economic moat and a durable competitive advantage over rivals, which enjoys a solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $7.76 per share this year, up from $5.79 per share last year, and to go to about $8.79 per share next year. Union Pacific has paid dividends to investors since 1900, and has increased its payments for eight consecutive years. During the past five years it has increased its dividends at an average rate of 15.7%, and its quarterly payment of $0.73 per share currently provides a yield of 1.84%.

 

The value of dividends reinvestment: A hypothetical investment in Union Pacific has grown cumulatively (including dividends reinvested) 16,008.22% during the past forty years. The same investment has grown only 7,887.59% in the same period of time, excluding dividends. During the same period, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Fund (VFINX) has grown cumulatively (including dividends reinvested) 8,887.13%. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 19.2%, which means the company is paying out 19.2% of all its net income in dividends, and is retaining a large percentage of earnings to reinvest or grow the business. Its average dividend payout ration (DPR) during the past five years is 35%. Its Price to Earnings ratio (P/E--a measure of valuation) of 10.4 is 48.9% below the S&P 500® index.

 

The actively managed no-load mutual funds Vanguard Dividend Growth Inv. (VDIGX) and Dodge & Cox Stock (DODGX) are major shareholders of UNP, holding 0.89% and 0.79% of its shares respectively. The stock is also one of the 63 holdings of the mutual fund managed my Moneypaper Advisors, the MP 63 Fund (DRIPX). UNP’s main competitors in the world are CSX Corp., Norfolk Southern Corp., Canadian National Railway Co. and East Japan Railway Co. UNP’s Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500® Index) is 0.85 so the stock is 15% less volatile than the Market.

 

Best and worst years during the past 10 years: Its best year was 2010, in which UNP returned, including dividends, 47.1%. On the flip side, its worst year was 2015, when the stock declined 32.5% including reinvested dividends. UNP’s dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, safekeeping, automatic investment or termination of the plan. With the stock being fundamentally attractive, this company is an appropriate holding for investors who wish to build holding over the long term.

 

Disclosure: Mario is a long-term investor of Union Pacific Corp., and his investing strategy is to invest small amounts periodically (also known as dollar-cost average or DCA), always with a long-term view. The author is co-manager of the MP 63 Fund (DRIPX), which also holds a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with UNP and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment, and should consult an independent financial advisor for any personal investment advice.

 

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