Monday, January 30, 2012

Stock Bought: NSC

For my first purchase today I bought shares of Norfolk Southern (NSC), a company that operates a major North American railroad network with over 21500 route miles of track predominantly in the eastern United States. This purchase adds to my existing position in NSC and comes on the heels of my recent purchase of Canadian National Railway (CNI).

NSC is a good dividend-growth stock. The company has paid uninterrupted dividends since going public in 1982 and increased its dividend for 11 consecutive years. As I noted in a recent post, NSC increased its dividend by 9.3% earlier this month. Since mid-2010 the company has been increasing its dividend every two quarters, so there might be another increase in August, which could result in an overall increase for 2012 that is near the 5-year average annual dividend growth rate of 19.5%.

I bought 15 shares of NSC at the price of $72.53 per share, which is less than the price of my existing position, so I was able to average down. I now have a total of 35 shares at an average price of $73.82 per share, giving me a 2.55% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $16.45, which is quite a bit more than the $8.60 I was getting before the recent dividend increase and this additional purchase. Moreover, given that the stock goes ex-dividend in just two days, my next dividend payment will reflect the higher amount. NSC will now contribute a total of $65.80 to my annual dividend income.

I am satisfied with my current railroad holdings and I do not plan to make any further additions soon. At some point in the future (maybe in the second half of 2012) I would like to start a position in Union Pacific (UNP) to complete my geographic diversification. However, in the meantime I will work on strengthening and diversifying other aspects of my portfolio.

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