In this article, we discuss 10 best railroad stocks that pay dividends.
The railroad industry in the US is one of the oldest sectors to play a crucial role in the country’s economy. The freight rail network in the US operates over 140,000 miles of privately owned track and moves one-third of all US exports, according to a report by the Association of American Railroads (AAR). In addition to this, the government is steadily taking important steps to improve rail infrastructure in the country, announcing over $368 million in Consolidated Rail Infrastructure and Safety Improvements (CRISI) in June to fund 46 projects in 32 states.
In the prevailing market environment, investors are looking to diversify their portfolios to clear away ongoing recession fears. Loop Capital, an investment management firm, recently gave an analysis on CNBC about railroad stocks, asserting that they are good options considering the current financial landscape. Analysts have forecasted strong volume growth and pricing gains for railroad companies despite possible supply chain issues. This comes in compliance with the recent analysis of AAR, which mentioned that demand for freight transportation is expected to rise 30% by 2040. In addition to this, nearly all railroad stocks pay dividends and focus on buybacks as well, which has contributed to their returns over the years.
The Dow Jones Transportation Average, a price-weighted index that tracks 20 transportation stocks traded in the US, has gained 13.37% quarter-to-date. Similarly, Dow Jones US Railroads Index soared 11.6% in the last three months, while its 12-month returns came in at 3.58%, as of the close of August 17. Some of the best railroad stocks that pay dividends include Canadian National Railway Company (NYSE:CNI), Norfolk Southern Corporation (NYSE:NSC), and Union Pacific Corporation (NYSE:UNP) among others discussed below.
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Our Methodology:
We picked railroad dividend stocks that pay dividends. The yields of the stocks are as of August 18. These railroad stocks are popular among the 900 hedge funds we track.
10 Best Railroad Stocks that Pay Dividends
10. Westinghouse Air Brake Technologies Corporation (NYSE:WAB)
Dividend Yield as of August 18: 0.63%
Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is an American passenger rail transport company that provides equipment, digital solutions, and value-added services. In Q2 2022, the company’s total backlog stood at $23.2 billion, up from $22 billion in the same period last year. The company’s cash from operations came in at $263 million, up from $223 million in a year-ago period.
Westinghouse Air Brake Technologies Corporation (NYSE:WAB) has been maintaining its dividends since 2013. It currently pays a quarterly dividend of $0.15 per share, with a dividend yield of 0.63%, as of August 18.
In August, Raymond James initiated its coverage of Westinghouse Air Brake Technologies Corporation (NYSE:WAB) with an Outperform rating and a $103 price target. The firm appreciated the company’s multi-year growth algorithm.
At the end of Q2 2022, 40 hedge funds in Insider Monkey’s database owned stakes in Westinghouse Air Brake Technologies Corporation (NYSE:WAB), the same as in the previous quarter. The collective value of these stakes is over $2.3 billion.
In addition to Canadian National Railway Company (NYSE:CNI), Norfolk Southern Corporation (NYSE:NSC), and Union Pacific Corporation (NYSE:UNP), Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is also one of the most prominent dividend stocks in the railroad sector.
9. CSX Corporation (NASDAQ:CSX)
Dividend Yield as of August 18: 1.16%
CSX Corporation (NASDAQ:CSX) is a Florida-based company that specializes in rail transportation and real estate. At the end of Q2 2022, 63 hedge funds in Insider Monkey’s database reported owning stakes in the company, down from 72 in the previous quarter. These stakes hold a total value of over $5 billion.
CSX Corporation (NASDAQ:CSX) reported revenue of $3.82 billion in the second quarter of 2022, showing a 27.8% year-over-year growth. The company’s operating income stood at $1.7 billion while its operating ratio increased to 55.4%. CSX Corporation (NASDAQ:CSX) maintains a 17-year track record of consistent dividend growth. Its quarterly dividend stands at $0.10 per share, with a dividend yield of 1.16%, as of August 18.
In July, Barclays raised its price target on CSX Corporation (NASDAQ:CSX) to $40 with an Overweight rating on the shares, appreciating the company’s service improvements this year.
ClearBridge Investments mentioned CSX Corporation (NASDAQ:CSX) in its Q4 2021 investor letter. Here is what the firm has to say:
“On a regional basis, the U.S. and Canada was the top contributor to quarterly performance, of which U.S. rail operators CSX was among the lead performers. CSX is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX performed well during the quarter after the company beats market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”
8. Werner Enterprises, Inc. (NASDAQ:WERN)
Dividend Yield as of August 18: 1.19%
Werner Enterprises, Inc. (NASDAQ:WERN) is a Nebraska-based transportation and logistics company that owns over 8,000 trucks and 24,000 trailers. The company has paid quarterly dividends to shareholders since 1987. Currently, it pays $0.13 per share in dividends every quarter and has a dividend yield of 1.19%, as of August 18.
In Q2 2022, Werner Enterprises, Inc. (NASDAQ:WERN) reported cash flow from operations of $112.6 million, up from $53.6 million in the same period last year. Its cash flow improved due to growing working capital. The company ended the quarter with cash and cash equivalents of over $54.4 million, with total assets worth over $772.4 million.
Street analysts appreciated the quarterly earnings of Werner Enterprises, Inc. (NASDAQ:WERN) as both Susquehanna and Citigroup raised their price targets on the stock in August to $50 and $44, respectively.
As of the close of Q2 2022, 19 hedge funds tracked by Insider Monkey owned stakes in Werner Enterprises, Inc. (NASDAQ:WERN), compared with 25 a quarter earlier. These stakes have a value of over $103.6 million. AQR Capital Management was the company’s leading stakeholder in Q2.
7. Canadian National Railway Company (NYSE:CNI)
Dividend Yield as of August 18: 1.78%
Canadian National Railway Company (NYSE:CNI) is a Montreal-based rail freight company that transports billions of worth of goods annually. The company was a popular buy among elite funds in Q2 2022, as 41 hedge funds in Insider Monkey’s database owned investments in the company, up from 38 in the previous quarter. These investments are collectively valued at over $7.4 billion.
Canadian National Railway Company (NYSE:CNI) holds a strong dividend growth history, raising its dividends at an average annual rate of 18% for the past 22 years consecutively. The company pays a quarterly dividend of C$0.7325 per share, with a dividend yield of 1.78%, as of August 18.
In Q2 2022, Canadian National Railway Company (NYSE:CNI) reported a 20.6% year-over-year growth in its revenue at C$4.34 billion. In the first six months of the year, the company generated C$1.5 billion in free cash flow, up from C$1.2 billion in the same period last year. Its cash flow smoothly covered the dividend payments of C$504 million during the quarter.
In July, National Bank raised its price target on Canadian National Railway Company (NYSE:CNI) to C$166 with a Sector Perform rating on the shares.
6. Norfolk Southern Corporation (NYSE:NSC)
Dividend Yield as of August 18: 1.92%
Norfolk Southern Corporation (NYSE:NSC) is a Georgia-based transportation company that specializes in the transportation of industrial products. Appreciating the company’s quarterly earnings, Credit Suisse lifted its price target on the stock in July to $277 with an Outperform rating on the shares. Other railroad dividend stocks like Canadian National Railway Company (NYSE:CNI), Norfolk Southern Corporation (NYSE:NSC), and Union Pacific Corporation (NYSE:UNP) are also favored by analysts.
In Q2 2022, Norfolk Southern Corporation (NYSE:NSC) reported income from railway operations at $1.3 billion, up 9% from the same period last year. The railway operating ratio came in at 0.9% and its operating revenues stood at $3.3 billion. Norfolk Southern Corporation (NYSE:NSC) has paid dividends on its common stock for 158 consecutive quarters since its inception in 1982. It pays $1.24 per share in quarterly dividends and has a dividend yield of 1.92%, as of August 18.
As of the close of Q2 2022, 44 hedge funds owned stakes in Norfolk Southern Corporation (NYSE:NSC), down from 48 in the previous quarter, as shown by Insider Monkey’s database. These stakes have a collective value of over $1.3 billion. With over $190.4 million, Two Sigma Advisors owned the largest position in the railroad company in Q2.
5. GATX Corporation (NYSE:GATX)
Dividend Yield as of August 18: 2.02%
GATX Corporation (NYSE:GATX) is a global leader in railcar leasing that owns fleets in North America, Europe, and Asia. The company also owns one of the largest aircraft spare engine lease portfolios. In Q2 2022, the company reported an investment volume of over $314.1 million and its net income came in at over $2.6 million. Its revenue for the quarter stood at over $312.7 million.
GATX Corporation (NYSE:GATX) has been making uninterrupted dividend payments since 1919. In the past decade, the company remained committed to shareholder returns, paying over $1.5 billion through dividends and share repurchases. It offers a quarterly dividend of $0.52 per share, with a dividend yield of 2.02%, as of August 18.
Highlighting the company’s pricing power, Susquehanna maintained its Positive rating on GATX Corporation (NYSE:GATX) in August.
At the end of Q2 2022, 17 hedge funds tracked by Insider Monkey owned stakes in GATX Corporation (NYSE:GATX), up from 14 in the previous quarter. These stakes hold a collective value of over $193.3 million. With 1.6 million shares, GAMCO Investors was the company’s leading stakeholder in Q2.
4. Union Pacific Corporation (NYSE:UNP)
Dividend Yield as of August 18: 2.15%
Union Pacific Corporation (NYSE:UNP) is a Nebraska-based railroad company that covers 23 states in the US. In July, Credit Suisse initiated its coverage of the stock with an Outperform rating and a $255 price target, appreciating its structural advantages and business fundamentals.
In Q2 2022, Union Pacific Corporation (NYSE:UNP) reported operating revenue of $6.3 billion, up 14% from the same period last year. This growth was driven by higher fuel surcharge revenue, core pricing gains, and a positive business mix. The company’s operating income stood at $2.5 billion, growing 1% from the prior-year period.
Union Pacific Corporation (NYSE:UNP) has paid dividends on its common stock for 123 consecutive years. Its quarterly payout stands at $1.30 per share, with a dividend yield of 2.15%, as of August 18. For FY22, the company targets a long-term dividend payout ratio of 45%.
As per Insider Monkey’s database, 65 hedge funds owned stakes in Union Pacific Corporation (NYSE:UNP), worth over $6.3 billion. Fisher Asset Management was the company’s leading stakeholder with stakes worth over $1.1 billion.
Carillon Tower Advisers mentioned Union Pacific Corporation (NYSE:UNP) in its Q1 2022 investor letter. Here is what the firm has to say:
“Union Pacific (NYSE:UNP) benefited from rising oil prices, which typically bring more demand for rail shipping as opposed to moving freight by truck. Rail transportation can be much more fuel-efficient than over-the-road trucking.”
3. The Greenbrier Companies, Inc. (NYSE:GBX)
Dividend Yield as of August 18: 3.34%
The Greenbrier Companies, Inc. (NYSE:GBX) is an American rail transport company that mainly specializes in transportation services. 11 hedge funds in Insider Monkey’s database owned stakes in the company in Q2 2022, down from 16 in the previous quarter. These stakes have a total value of nearly $30 million.
In fiscal Q3 2022, The Greenbrier Companies, Inc. (NYSE:GBX)’s revenue showed a 76.3% year-over-year growth at $793.5 million. Its new railcar backlog reached its highest value in six years at $3.6 billion and recorded a lease fleet utilization of 98%. The company ended the quarter with $450 million in cash and cash equivalents.
On July 11, The Greenbrier Companies, Inc. (NYSE:GBX) declared a 33rd consecutive quarterly dividend of $0.27 per share. As of August 18, the stock’s dividend yield came in at 3.34%.
2. Trinity Industries, Inc. (NYSE:TRN)
Dividend Yield as of August 18: 3.36%
Trinity Industries, Inc. (NYSE:TRN) is a market-leading company that provides railcar products and services in North America. As the company improved its inventories to speed up its production in the second half of the year, Wells Faro reiterated its Overweight rating on the stock in July.
In Q2 2022, Trinity Industries, Inc. (NYSE:TRN) reported revenue of $417 million, showing a 12.2% year-over-year growth. Its backlog was recorded at $2.2 billion at the end of the quarter, and lease fleet utilization stood at 97.2%. Year-to-date, the company returned $90 million of capital to shareholders. Moreover, its strong free cash flow after investments and dividends stood at $43 million.
Trinity Industries, Inc. (NYSE:TRN) has raised its dividends for 11 years in a row. The company pays a quarterly dividend of $0.23 per share with a dividend yield of 3.36%, as of August 18.
As of the close of Q2 2022, 18 hedge funds in Insider Monkey’s database owned investments worth $80.4 million in Trinity Industries, Inc. (NYSE:TRN). Chuck Royce and Jim Simons were two of the company’s most prominent stakeholders in Q2.
1. USD Partners LP (NYSE:USDP)
Dividend Yield as of August 18: 9.65%
USD Partners LP (NYSE:USDP) develops and operates energy-related rail terminals and other midstream infrastructure assets. On August 1, the company declared a quarterly dividend of $0.1235 per share, with a dividend yield of 9.65%.
In Q2 2022, USD Partners LP (NYSE:USDP) reported a net income of $3.8 million, and its revenue for the quarter came in at $33.7 million. The company’s net cash provided by operating activities stood at $6.2 million, with a distributable cash flow of $10.2 million. Its cash position also remained stable, with $4.3 available in cash and cash equivalents at the end of the quarter.
At the end of Q2 2022, EJF Capital was the company’s only stakeholder, with stakes worth $130 million.
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Disclosure. None. 10 Best Railroad Stocks that Pay Dividends is originally published on Insider Monkey.
