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5 Transportation Stocks With Decent Dividend Yield to Watch for

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The widely-diversified Zacks Transportation sector has declined 9.3% year to date.

Zacks Investment Research
Image Source: Zacks Investment Research

The sector is being hit hard by headwinds like increasing fuel costs and supply-chain woes despite most corners of the investing space witnessing high demand for their offerings, which caused an imbalance in demand-supply. For example, with the relaxation of COVID-related restrictions were relaxed, travel seemed to resume its pre-pandemic frequency level. As a result, airlines started witnessing buoyant air-travel demand but unfortunately, staff shortage induced multiple flight cancellations, affecting profitability in turn. Moreover, with oil price moving north, fuel costs flared up significantly. This is hurting the bottom-line performance of transportation stocks as fuel expenses represent one of the major input costs for transportation players.

But do the above challenges and other woes imply that investors interested in the transportation sector should shun the stocks belonging to this key sector? The answer is a firm no. We believe that dividend-paying transportation stocks should be on an investor’s watchlist to withstand the headwinds and volatility. Stocks like Ryder System (R - Free Report) , GATX Corporation (GATX - Free Report) , Triton International , Union Pacific Corporation (UNP - Free Report) and United Parcel Service (UPS - Free Report) fit the bill and should be on investors’ radar.

Furnishing one’s basket with dividend stocks shows prudence, as these provide an avenue of steady income and a cushion against market risks. Needless to say, investors are always on the lookout for companies with a consistent and incremental dividend history.

How to Pick the Right Dividend Stocks

Despite the benefits associated with dividend stocks, it is true that not every company can maintain its dividend-paying momentum. Hence, investors must be judicious while selecting dividend stocks for steady returns to grace their portfolio.

To guide investors interested in the transportation sector, we came up with certain parameters using the Zacks Stocks Screener.

We shortlisted transportation stocks having a)a dividend payout ratio of less than 60% (the dividend payout ratio — Dividends paid/Net income — gives the proportion of earnings paid out as dividends to shareholders. A payout ratio below 60 looks quite sustainable), b) a dividend yield in excess of 2% (dividend yield denotes the percentage of a company’s share price that it shells out as dividends annually) and c) five-year historical dividend growth of greater than or equal to 0.001 (to ensure that the company has grown dividend over the past five years). Our shortlisted stocks possess either a Zacks Rank #3 (Hold), 2 (Buy) or 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Our Choices

Ryder: R provides integrated logistics and transportation solutions. Strong freight market conditions in the United States, upbeat rental demand and favorable pricing are key catalysts for Ryder’s growth.

Ryder pays out a quarterly dividend of 62 cents ($2.48 annualized) per share that gives it a 3.11% yield at the current stock price. The presently Zacks Rank #2 player’s payout ratio is 16%, with a five-year dividend growth rate of 3.85%. (Check Ryder System’s dividend history here).

Ryder System, Inc. Dividend Yield (TTM)

Ryder System, Inc. Dividend Yield (TTM)

Ryder System, Inc. dividend-yield-ttm | Ryder System, Inc. Quote

GATX: Based in Chicago, IL, GATX is a global railcar lessor with owned fleets in North America, Europe and Asia. Improvement in the North American railcar leasing market is expected to continue driving its growth.

GATX pays out a quarterly dividend of 52 cents ($2.08 annualized) per share, giving it a 2.08% yield at the current stock price. The currently Zacks #2 Ranked stock’s payout ratio is 34%, with a five-year dividend growth rate of 4.46%.(Check GATX Corporation’s dividend history here).

GATX Corporation Dividend Yield (TTM)

GATX Corporation Dividend Yield (TTM)

GATX Corporation dividend-yield-ttm | GATX Corporation Quote

Triton International: TRTN was formed from the Jul 12, 2016, all-stock merger between Triton Container International Limited and TAL International Group. Triton International, based in Hamilton, Bermuda, is the largest lessor of intermodal containers (large steel boxes used for transporting freight by ship/rail/truck). TRTN also focuses on leasing chassis, used for transporting containers. Strong trade volumes and container demand are driving its top line.

TRTN pays out a quarterly dividend of 65 cents ($2.60 annualized) per share that gives it a 4.11% yield at the current stock price. The industry player presently has a Zacks Rank of 2 and a payout ratio of 24%, with a five-year dividend growth rate of 6.98%. (Check Triton International’s dividend history here).

Union Pacific is an Omaha, NE-based railroad operator. Strong freight demand is supporting growth at UNP. However, supply-chain issues are bothersome.

UNP pays out a quarterly dividend of $1.30 ($5.20 annualized) per share that gives it a 2.19% yield at the current stock price. The currently Zacks Rank #3 player’s payout ratio is 48%, with a five-year dividend growth rate of 13.65%. (Check Union Pacific’s dividend history here).

UPS is based in Atlanta. The package delivery entity is benefiting from the phenomenal rise in e-commerce demand during the pandemic.

UPS pays out a quarterly dividend of $1.52 ($6.08 annualized) per share, which gives it a 2.95% yield at the current stock price. The presently Zacks #3 Ranked stock’s payout ratio is 48%, with a five-year dividend growth rate of 8.81%. (Check UPS’ dividend history here).

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