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Image: Union Pacific.

The railroad industry has gone through some tough times over the past year, as falling energy prices have put a damper on the growth that Union Pacific (NYSE:UNP) and some of its rivals have seen in past years. Although Union Pacific doesn't have the same amount of exposure to the struggling coal industry as CSX (NASDAQ:CSX) and Norfolk Southern (NYSE:NSC) do because of their focus area in the Appalachian region, all three companies had taken advantage of opportunities to transport crude oil and the chemicals and other supplies needed to perform hydraulic fracturing operations. With analysts expecting falling earnings in 2015 and only a mild bounce in 2016, Union Pacific shareholders want to know if they should expect a dividend increase this year. Let's look more closely at Union Pacific to see whether a dividend hike is in the cards for 2016.

Dividend Stats on Union Pacific

Current Quarterly Dividend Per Share

$0.55

Current Yield

2.9%

Number of Consecutive Years With Dividend Increases

9 years

Payout Ratio

37%

Last Increase

February 2015

Source: Yahoo! Finance. Last increase refers to ex-dividend date.

Chugging along with higher dividends
Union Pacific has quietly put together a strong history for dividend growth. Over the past decade, the railroad has given investors 12 dividend increases, taking its quarterly payout up by more than six times. The company hasn't always been consistent about what time of year it makes increases, sometimes making multiple boosts per year and other times going more than a full year without making any increase at all.

Moreover, the dividend increases that Union Pacific has made have been substantial. The hike it made in early 2015 raised Union Pacific's dividend by 10%, and the increases it made previously were generally in the neighborhood of 10% to 25%. The increases reflected the success that the railroad industry has had, as Union Pacific, CSX, and Norfolk Southern all experienced good times in the industry thanks to renewed interest in rail transportation as a fuel-efficient way to move goods long distances.

<a href="http://ycharts.com/companies/UNP/chart/"><img src="http://media.ycharts.com/charts/f57c34a185fadc17dd589ed4a44efa0c.png" alt="UNP Dividend Chart" /></a><p style="font-size: 10px;"><a href="http://ycharts.com/companies/UNP/dividend">UNP Dividend</a> data by <a href="http://ycharts.com">YCharts</a></p>

Unfortunately, Union Pacific has gone through some struggles more recently, along with the rest of the industry. In its most recent quarter, a sharp drop in coal shipments helped lead to weaker volumes for the railroad, along with reduced shipping in its industrial and intermodal areas. As CSX and Norfolk Southern have also seen, lower fuel costs helped boost Union Pacific's efficiency ratios but also reduced the amount that the company was able to raise from customer fuel surcharges.

Will Union Pacific's dividends gain steam?
Union Pacific's executives remain uncertain about the company's near-term future, and that could lead to some conservative decisions about its dividend. In its October conference call, Union Pacific CEO Lance Fritz said that "energy prices, the consumer economy, and the strength of the U.S. dollar will all be key to future demand." If macroeconomic factors don't start turning in the railroad's favor, then Union Pacific could see another year of relatively weak results.

Yet Union Pacific should be able to raise its dividend even if earnings remain subdued. The railroad pays out less than 40% of its earnings in the form of dividends, which is largely consistent with what Norfolk Southern and CSX pay. That gives Union Pacific the flexibility it needs to consider an increase to extend its dividend-raising streak.

Given its willingness to change up its schedule on raising dividends, investors shouldn't automatically assume that the railroad will increase its payout within the next couple of weeks to match the time of year it announced its 2015 increase. Nevertheless, barring further damage to its business, Union Pacific should be able to give its shareholders a higher payout by the end of 2016 if not before.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends CSX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.