![\"Increasing](\"http:\/\/www.profitconfidential.com\/wp-content\/uploads\/2013\/09\/050913_PC_clark.jpg\" "\\"Increasing")
Blue chips<\/a> across the board have been taking a break, along with the rest of the stock market. But in my mind, their leadership remains intact, and so does the performance of the Dow Jones Transportation Average.<\/p>\nThis index recently broke below its 50-day simple moving average (MA), but this is very normal and not a trendsetting event. Many component stocks have been on fire all year and are due for a sustained period of retrenchment.<\/p>\n
One component company<\/a> that I continue to like is Union Pacific Corporation (UNP). The railroad sector is old economy, but it\u2019s still a solid gauge on domestic economic activity. Plus, Union Pacific is a solidly profitable company that provides growing dividends<\/a> to shareholders. The stock is currently yielding 2.1%.<\/p>\n Perusing the company\u2019s regulatory filings, what stands out is Union Pacific\u2019s strong financial recovery from 2009, when business operations experienced a pronounced downturn. Of course, we\u2019re dealing with a very mature blue chip<\/a> company, so financial growth isn\u2019t like a small-cap technology stock. But the company really did turn its financial metrics around in a diligent manner, and the results are evidenced in its share price performance.<\/p>\n Chart courtesy of www.StockCharts.com<\/i><\/p>\n Union Pacific\u2019s operating revenues dropped significantly from $18.0 billion in 2008 to $14.1 billion in 2009. But the recovery was swift, as 2010\u2019s operating revenues came back up to $17.0 billion, followed by $19.6 billion in 2011 and $20.9 billion last year.<\/p>\n Notable in the company\u2019s economic recovery was its earnings and dividend payments to shareholders.<\/p>\n Earnings in 2009 fell to $1.89 billion from $2.3 billion in 2008. They recovered commensurately with revenues to $2.8 billion in 2010, $3.3 billion in 2011, and $3.9 billion in 2012.<\/p>\n Dividends per share also accelerated, even through the 2009 down year, while the company\u2019s debt-to-capital ratio fell consistently since 2009 and return on average shareholders\u2019 equity improved substantially.<\/p>\n It\u2019s this track record of financial success and recovery from the significant downturn that stands out as a major selling feature for Union Pacific. Every company experiences its own business cycle, and a diligent management team along with increased dividends kept investors interested in this stock.<\/p>\n The year 2012 was a record operating performance year for Union Pacific, and even if there is no full-year volume growth this year, company management still expects 2013 earnings to exceed those of 2012. From my perspective, these expectations are worth owning.<\/p>\n Railroad stocks aren\u2019t for everyone, but as part of a long-term equity portfolio of blue chips, I think a railroad company should be included.<\/p>\n A stock like Union Pacific is the kind of enterprise that you watch and keep an eye on, perhaps on a monthly basis, looking for opportune times to consider new positions. I\u2019m not an advocate of buying this market currently\u2014it\u2019s already gone up and certainty regarding monetary policy is in flux. (See \u201cWhy Corporate Earnings Are Taking a Back Seat to the Fed<\/a>.\u201d<\/p>\n Union Pacific recently increased its dividend again by 14.5%, or $0.10 per share, to $0.79 quarterly. Strong cash flows and other solid financial metrics continue to make this company an attractive security for long-term portfolios.<\/p>\n![\"Union](\"http:\/\/www.profitconfidential.com\/wp-content\/uploads\/2013\/09\/Union-Pacific-Corporation-Chart.jpg\" "\\"Union")
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