Canadian Pacific Railway

I am today reviewing this stock, (TSX-CP) because it has published its fourth quarterly results and I own this stock. I have owned this stock since October 2006 and I have made a return of 0% per year on my shares. Since I bought them for basically the same price as they are today, I am earning a dividend yield of 1.8%, which is the current yield.

First, I should mention that both this stock and CNR are on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). However, CP has not raised their dividend since early in 2008, while CNR has consistently raised their dividends each year over the last 10 years.

The growth figures for this company are a bit mixed. The best would be for Total Return, which for the last 5 and 10 years is just over 14% per year for each period. The worse figures are for Cash Flow from Operations, and for the last 5 and 10 year periods, Cash Flow as declined 8% per year and 3% per year over these periods. The other things to mention is that revenues only grew by 2% per year for the last 5 years and the earnings only grew by 7% per year over the last 5 years.

The Liquidity Ratio is up recently to 1.03. This is ok, but not great. The asset/liability ratio is much better at 1.76. The return on equity at 9.1% for the year ending in 2009 is fine, with the 5 year average being better at 12.8%. Also, the accrual ratio is ok at 3.35, but what I do not like to see is the net income being higher than the Cash Flow from Operations. You have to question the quality of the earnings when this occurs and also, when the cash flow from operations drops over 50%, which it did between 2008 and 2009.

I will continue to hold my shares. I have only had them for 3 years, and we have gone into a recession since I bought them, so not making money on this purchase is not unreasonable. Tomorrow, I will talk about whether the current price is good or not and what the analysts are saying about this stock.

This company is a transcontinental railway operating in Canada and the U.S. Its rail network serves the principal centers of Canada, from Montreal to Vancouver and the U.S. north-east and mid-west regions. Alliances with other carriers extend its market reach throughout the U.S. and into Mexico. Canadian Pacific Solutions provides logistics and supply chain expertise. Its web site is www.cpr.ca/. See my spreadsheet at www.spbrunner.com/stocks/cp.htm .

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.