Dividend Strength on the Tracks: Why Union Pacific (UNP) is a Buy in August

Union Pacific Corporation (NYSE:UNP) is included among the 10 Best Dividend Stocks to Buy in August.

Union Pacific Corporation (NYSE:UNP), a railroad holding company, earns its freight revenue from three main segments: bulk, industrial, and premium, each contributing about one-third of the total. Its diverse range of products and efficient cost structure help the company stay resilient even during times of higher tariffs. The company regularly delivers strong operational results and solid returns on invested capital, with a high operating margin that reflects its ability to stay profitable after covering expenses.

In one of the recent developments, Union Pacific Corporation (NYSE:UNP) is reportedly nearing an agreement to acquire Norfolk Southern in a potential cash-and-stock transaction, which could be finalized as soon as next week, according to Bloomberg News. The two railroad companies, which together are valued at around $200 billion, have confirmed that their merger discussions are in advanced stages.

If the deal goes through, it would combine Union Pacific Corporation (NYSE:UNP)’s western US rail network, based in Omaha, Nebraska, with Norfolk Southern’s East Coast operations, headquartered in Atlanta.

In addition to its growth strategies, Union Pacific Corporation (NYSE:UNP) is a solid dividend payer. On July 16, the company declared a 3% hike in its quarterly dividend to $1.38 per share. This was the company’s 19th consecutive year of dividend hikes, which makes it one of the best dividend stocks. Moreover, UNP has never missed a dividend in 125 years. The stock has a dividend yield of 2.41%, as of July 28.

While we acknowledge the potential of UNP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.