In a shareholder-friendly measure, Norfolk Southern Corporation (NYSE:NSC) announced a hike in its dividend payout. This strategic move is reflective of the company’s intention to utilize free cash for enhancing shareholders’ returns.
Notably, the company raised its quarterly dividend by 9% to 94 cents a share ($3.76 annually) from 86 cents ($3.44 annually). The new dividend, approved by the company’s board of directors, will be paid on Sep 10, 2019, to its stockholders of record as of Aug 5. The dividend yield based on the new payout and the Jul 26 closing market price is approximately 1.98%. The dividend yield for its industry is currently pegged at 1.7%.
Impressive History of Dividend Hikes
With this latest hike, Norfolk Southern marked its fourth quarterly dividend increase in the last 16 months. In January 2018, the company hiked its dividend by 18% to 72 cents a share. This amount was further raised by 11% to 80 cents per share last July. Again, in January 2019, this Norfolk, VA-based company increased its quarterly dividend payout to 86 cents. In fact, Norfolk Southern has paid dividends for 148 consecutive quarters since its inception in 1982.
We believe that this latest dividend hike not only highlights Norfolk Southern’s commitment to create value for shareholders but also underlines the railroad operator’s healthy financial condition and confidence in its business. During the first half of 2019, this Zacks Rank #3 (Hold) company paid dividend worth $458 million, up 12.3% year over year. It also generated free cash flow of $973 million in the same period.
Additionally, Norfolk Southern is confident about delivering solid financial numbers in the upcoming quarters to boost shareholder returns further.
Union Pacific: Another Railroad Operator to Hike Dividend
Apart from Norfolk Southern, its rival Union Pacific (NYSE:UNP) announced a dividend hike in July. The company hiked its quarterly dividend to 97 cents per share (annualized $3.88 per share) on Jul 25, mirroring a 10.2% improvement from the previous payout of 88 cents per share (annualized $3.52 per share). The new dividend, which has been approved by the company’s board of directors, will be paid on Sep 30, 2019, to its stockholders of record as of Aug 30.
With respect to dividend increases, Union Pacific has a stellar history like Norfolk Southern. The latest dividend hike marks the fifth such increase by Union Pacific since November 2017.
Some other railroad operators to have increased their respective dividend payouts so far this year are Canadian Pacific Railway (NYSE:CP) and Canadian National Railway (NYSE:CNI) . As investors prefer an income-generating stock, a high dividend yielding one is much coveted. Needless to say that investors are always on the lookout for companies with a track record of consistent and incremental dividend payments.
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