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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *Norfolk Southern Corp. (NSC)

Company Information:

Headquartered in Norfolk, Virginia, Norfolk Southern Corporation conducts rail transportation business, operating 36,200 miles in 22 eastern states, the District of Columbia and has rights in Canada from Buffalo to Toronto and over the Albany to Montreal route, offering the largest intermodal network in eastern North America. Its current total market capitalization of $50.0 billion makes NSC a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) and its long history of consistent earnings growth and dividend payments makes it a solid company. It is considered a well-diversified business with wide economic moat and sustainable competitive advantage over rivals, which also enjoys a solid management and corporate culture.

 

According to Yahoo! Finance, consensus estimates call for the company to earn about $10.72 per share this year, up from $9.51 per share in 2018, and to go to about $12.06 per share in 2020. Norfolk has paid dividends to investors since 1901, and has increased its payments for nine consecutive years, currently providing a yield of 1.75%. Since 1999, the company has increased the dividends paid to investors from 40 cents per share yearly, to $3.04 cents per share yearly on 2018.

 

The value of dividends reinvestment: A hypothetical investment in Norfolk Southern Corp. has grown cumulatively (including dividends reinvested) 8,113.70% during the past thirty-five years. The same investment has grown only 3,390.56% during 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 Admiral (VFIAX) has grown cumulatively (including dividends reinvested) 4,327.94%. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 32.3%, which means the company is paying out only 32.3% of all its net income in dividends, and is retaining a percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is 34%. Its current Price to Earnings ratio (P/E --a measure of valuation) of 18.46 is 1.7% below the S&P 500® index, and the forward P/E ratio is 17.79.

 

Technically (from the chart’s perspective) NSC is trading 10.2% below its 52 weeks high and 4.0% below its 50-day moving average line (50sma), while it is forming a price consolidation pattern between $211 and 180, in which $180 is acting as a technical support level (floor). The index funds Vanguard Total Stock Market Index and Vanguard 500 Index are the biggest shareholders of NSC, holding 2.8% and 2.0% of its shares respectively. NSC’s main competitors are Union Pacific Corp. (UNP) and CSX Corp. (CSX).

 

Best and worst years during the past 35 years: Its best year was 2004, in which NSC returned, excluding dividends, 53.0%. On the flip side, its worst year was 1999, when the stock declined 35.3% excluding dividends. NSC’s dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a holding over the long term.

 

Disclosure: Mario Medina has no position in Norfolk Southern Corp, and has no plans to initiate any position in the immediate future. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with NSC 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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