Railroad operator Union Pacific (NYSE: UNP) has been transporting items for over 160 years. It has paid a dividend yearly for the final 124 of them.
The final time it minimize the dividend was 25 years in the past. Will the corporate make it 26? Let’s have a look…
Final yr, free money circulate was $5.7 billion, down from 2021’s $6.1 billion, which had been the best in a minimum of 10 years.
Money circulate from operations was truly greater, however because of a virtually $700 million improve in capital expenditures, free money circulate declined, which Security Web doesn’t wish to see.
Whereas the corporate introduced in $5.7 billion in free money circulate, it shipped $3.2 billion again to shareholders within the type of dividends for a really snug payout ratio of 56%.
Meaning even when free money circulate have been to leap the tracks and decline once more, there may be loads of room earlier than the dividend would eat up the entire free money circulate and the corporate must take into account a minimize.
In 2023, free money circulate is forecast to come back in at $5.6 billion, so so long as it’s within the ballpark, dividend traders shouldn’t fear.
As I discussed, the corporate has paid a dividend for greater than a century and the final minimize was in 1998, so its current dividend-paying historical past is great. It has raised the dividend yearly for the previous 16 years.
The present $1.30 per share quarterly dividend equals a 2.6% yield. So Union Pacific isn’t a very excessive yielder. However with a 16-year streak of mountaineering the dividend, a low payout ratio and loads of money circulate, Union Pacific’s dividend shouldn’t go off the rails anytime quickly.
Dividend Security Ranking: B
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