We recently published a list of 25 Best Dividend Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Union Pacific Corporation (NYSE:UNP) stands against other best dividend stocks to buy according to billionaires.
Dividend stocks have been overshadowed in the market as tech and AI-related equities have surged to record levels. However, Ned Davis Research suggests that a more challenging macroeconomic environment this year could create favorable conditions for dividend stocks to gain traction.
With concerns over economic growth and uncertainty surrounding President Trump’s tariff policies, investors have been looking for defensive strategies. In this context, dividend stocks have performed well, providing a safe haven while offering attractive passive income opportunities. The Dividend Aristocrat index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, has surged by nearly 5% in 2025, as compared to a 0.32% decline in the broader market, as of the close of March 3.
READ ALSO: 10 Best Affordable Dividend Stocks To Buy According to Hedge Funds
Companies that consistently pay dividends are often viewed as stable investments due to their reliable cash flows and financial strength. These firms typically operate in non-cyclical sectors like consumer staples, utilities, and healthcare, making them less susceptible to economic downturns and helping investors mitigate portfolio risks. At the start of 2025, heightened concerns about resurgent inflation and stagnating economic growth prompted investors to bolster their portfolios with defensive stocks. This strategic shift aimed to safeguard investments against potential market volatility associated with these economic challenges.
Ned Davis’s Clissold and his team made the following comment on the situation:
“One would expect that companies that pay dividends are more stable and have lower growth rates. As a result, they should rally less in up markets and decline less in down markets. In other words, they have lower betas than non-dividend-payers. … As a group, dividend-payers have a beta of 0.99 versus 1.11 for nonpayers.”
Analysts are optimistic about the growth of dividend stocks, largely due to anticipated increases in free cash flow (FCF). FCF represents the cash a company has remaining after covering its operating expenses and capital expenditures. This surplus is crucial for corporate boards when deciding on capital allocation strategies, such as enhancing dividend payouts or initiating stock buyback programs. Ameriprise Financial projects a continuous rise in FCF growth through 2027, suggesting that companies with substantial FCF are likely to expand their dividend distributions and share repurchase initiatives in 2025.
The report further mentioned that typically, mature companies—those beyond their initial growth phases—and businesses benefiting from significant economies of scale or operating in less capital-intensive industries generate higher levels of FCF. Sectors such as communication services, consumer staples, and information technology often exhibit elevated FCF, positioning them well for potential increases in shareholder returns.
In dividend investing, investors often favor companies that have consistently increased their payouts. BMO suggested that dividend growth stocks can help strengthen portfolios during periods of market volatility while enhancing overall returns. The firm emphasizes that a dividend growth strategy targets stocks that offer both yield and growth potential, as these companies generally demonstrate a track record of stable earnings and cash flow. Over the long term, such attributes tend to be valued by investors.
Our Methodology
For this article, we scanned Insider Monkey’s Q4 2024 proprietary database of billionaires’ stock holdings and identified dividend stocks from the list. From that group, we picked the top 25 stocks with at least 2% dividend yields, as of March 3. All of these billionaires are founders or managers of some of the top hedge funds in the world.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An intermodal container train winding through a rural landscape.
Union Pacific Corporation (NYSE:UNP)
Number of Billionaire Investors: 14
Dividend Yield as of March 3: 2.17%
Union Pacific Corporation (NYSE:UNP) is an American railroad holding company that transports a wide range of products and commodities, providing it with broad exposure across multiple industries. The company provides services to industries such as agriculture, automotive, and energy. In recent years, it has prioritized enhancing efficiency by expanding its revenue streams and broadening its geographic presence—both essential for staying competitive in the rail transportation sector.
In the fourth quarter of 2024, Union Pacific Corporation (NYSE:UNP) reported $6.12 billion in revenue, marking a 1% decline from the previous year. However, a 5% rise in revenue carloads helped mitigate some of the downturn. The company’s operating ratio improved to 58.7%, reflecting a 220-basis-point enhancement, despite a 70-basis-point impact from the ratification of a crew staffing agreement. Additionally, operating income increased by 5%, reaching $2.5 billion.
Union Pacific Corporation (NYSE:UNP), one of the best dividend stocks, has been consistently paying dividends for 125 consecutive years and has raised its payouts for 18 years in a row. This dividend growth is due to the company’s strong cash position. In FY24, it generated over $9.3 billion in operating cash flow and it ended the quarter with over $1 billion available in cash and cash equivalents. The company’s quarterly dividend comes in at $1.34 per share and has a dividend yield of 2.17%, as of March 3.
Overall, UNP ranks 22nd on our list of best dividend stocks to buy according to billionaires. While we acknowledge the potential for UNP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than UNP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
