Investing In Railroad Dividend Stocks
A couple days ago I wrote an article highlighting the railcar industry and several dividend stocks worth considering in that sector. Many of the railcar stocks are experiencing back orders for their railcars as railroad lines look to upgrade and expand their aging fleet. The railcar dividend stocks such as TRN and ARII are especially interesting as they are experiencing great demand for their oil and gas railcars to meet the demand of the ever growing fracking boom being experienced in North America. It seems that rail is the transport mode of choice for this commodity. Today, I’ll be discussing the various dividend paying railroad companies and provide an overview of each one.
First up, is one of the largest railroad companies around by market cap, Union Pacific Corporation (UNP). This stock currently pays a dividend yield of 2.00% with a moderately low payout ratio of 36.2% based on its current EPS of $5.53. Growing its dividend for the last four years, UNP also has a very impressive ten year annualized dividend growth rate of 19.58%. On the valuation side of things, UNP is slightly expensive relative to the S&P but in line with industry peers at 21.60. Forward PE looks much better at 16.65 suggesting share price has run a little ahead of earnings as of late.
Next, is the Canadian railroad stalwart Canadian National Railway Company (CNI). Currently yielding 1.40% with a moderately low payout ratio of 29.9% based on an EPS $3.34, CNI also has a very impressive ten year annualized dividend growth rate of 17.32%. From a PE standpoint, CNI appears to be a little pricey at current levels at 24.06 but like UNP, the forward PE for this one is a much more attractive 17.03. Though very popular among the dividend blogging community, you might want to wait before you pull the trigger on this one.
Another popular railroad dividend stock among the dividend bloggers is Norfolk Southern Corporation (NSC). NSC currently yields 2.20% with a moderately low payout ratio of 35.4% based on an EPS $6.44. Having raised its dividend for the last four years like UNP, NSC also has an awesome ten year annualized dividend growth rate of 21.13%. I think I’m starting to notice a trend here about these impressive dividend growth rates with the railroad stocks. On the valuation side of things, NSC looks to be on the cheaper side of things relative to industry peers at 18.17 with a forward PE of 14.36. Have share prices been lagging on this one and is NSC a better value relative to other railroad stocks?
