Buybacks, Dividends, Stock Splits: Business Is Getting Better for This Must-Watch Stock

How Investors Could Use This Stock as Their Economic Crystal BallThere are a lot of stocks bouncing off their all-time record-highs and Union Pacific Corporation (UNP) is one of them.

Not surprisingly, the company just announced a two-for-one stock split with the stock dividend, effective June 6, 2014 to shareholders of record on May 27, 2014. The last time Union Pacific split its shares was in May of 2008, also effecting a two-for-one stock split.

Management also announced the second installment of its new $0.91-per-share quarterly dividend. The previous dividend amount was $0.79 a share.

Only four years ago, the company’s dividend was $0.33 a share, illustrating just how good an investment this railroad has been.

And business is getting better. Union Pacific plans to spend $4.1 billion in total capital expenditures this year. The company recently boosted this figure by $150 million, saying that it needs to purchase 29 more locomotives than it previously estimated.

In October of last year, this stock was trading for $150.00 a share. It just bounced off an all-time record-high of $196.16. Despite being cut in half during the 2008/2009 financial crisis, this stock’s been going up since the beginning of 2005, which is an excellent track record.

The company’s stock chart is featured below:

Union Pacific Corp Chart

Chart courtesy of

Union Pacific is a great benchmark company that’s worth checking in on once every quarter, even if you aren’t interested in being a shareholder. The reason for this is because this railroad operator is its own leading indicator on the U.S. economy.

Railroads are reactionary enterprises. If they need more cars, they put them on; if they need more locomotives, they buy them. That, in itself, is a positive gauge regarding the markets they serve.

By group, the two largest revenue generators for the company are industrial products and intermodal. This is followed by shipments of coal, agricultural products, chemicals, and automotives.

The first quarter of 2014 saw strong comparable growth in the shipment of industrial products and agricultural products. Grain shipments rose 39% in the first quarter. Due to the impact of the severe drought in 2012, 2013 first-quarter grain shipments were abnormally low, thereby resulting in the big percentage gain.

Within the industrial products category was strong quarterly growth in the shipment of non-metallic minerals, which translates to sand used for fracking. The company also experienced meaningful growth in the shipment of construction-related materials.

In the railroad business, a company’s operating ratio is the big industry metric. This is a company’s operating expenses reflected as a percentage of operating revenues. Union Pacific’s operating ratio improved two points to a first-quarter record of 67.1%.

At the beginning of this year, the company initiated a new buyback program authorizing the purchase of 60 million of its own shares by the end of 2017. In the first quarter, it bought 3.82 million of its own shares, which is very close to two full days of average trading volume. (See “How Past Investment Trends Predicted This Stock Market Action.”)

Union Pacific reports its next set of quarterly results on July 24. That will be an earnings report worth reading. Subsequent to this is the company’s SEC form 10K filing, which is really worth reading. This form provides a much more detailed breakdown of what’s happening within this business and big parts of the U.S. economy, too.

Union Pacific is still very much a growing enterprise and the company’s rising prices for freight have so far not affected demand. Union Pacific is a great benchmark stock and a worthwhile old economy play that’s got more legs in this market. Even if you’re not interested in investing in a solid railroad stock like Union Pacific, it’s a company worth adding to your watch list if only to better shape your market view.