Union Pacific-All It Takes Is $4,500 Invested in This Dirt-Cheap Value Stock to Help Generate Over $100 in Passive Income per Year

Core Viewpoint - Union Pacific is considered a valuable investment opportunity despite recent stock price declines and earnings misses, primarily due to its strong infrastructure assets and consistent dividend payments [1][11]. Financial Performance - Union Pacific's stock has decreased by over 8% in the last three years, reflecting challenges in its financial performance [3]. - Operating revenue for Q1-Q3 2024 was reported at $18.1 billion, with total operating expenses at$ 10.9 billion, resulting in an operating income of $7.19 billion and an operating margin of 39.7% [9][10]. - Revenue growth has been modest, while operating margins have declined due to inflationary pressures affecting costs, including fuel and labor [4][6]. Dividend and Shareholder Returns - The company has a dividend yield of 2.3%, with a projected dividend payment of$ 5.28 per share for 2024, up from $5.20 in 2023, marking a 3% increase [2][11]. - Union Pacific has a strong track record of dividend payments, having raised its dividend annually since 2008 and maintained a payout ratio just under 50%, indicating affordability even in the face of declining earnings [11][12]. - Over the past decade, the company has increased its dividend by 168% and reduced its outstanding share count by 31.4%, contributing to faster growth in earnings per share (EPS) compared to net income [12]. Capital Investments - Union Pacific plans to invest$ 3.4 billion in capital expenditures in 2024, focusing on infrastructure upgrades and equipment, which is consistent with its previous investment levels [7][8]. Market Position and Industry Context - The railroad industry is characterized by high operational efficiency, and Union Pacific benefits from a diverse revenue mix, transporting various bulk and industrial products [5][6]. - Despite cyclical demand fluctuations tied to macroeconomic conditions, railroads generally maintain high operating margins, which supports Union Pacific's profitability [6][7]. Valuation - Union Pacific's current price-to-earnings (P/E) ratio is 21.2, which is within its historical range of 20.3 to 22.1, suggesting it is fairly valued relative to its historical performance [13].