Thursday, February 16, 2012

Canadian National Railway 2

I own this stock (TSX-CNR, TSX-CNI). I first invested in the company in 2005 and then bought more in 2009 and 2011. My purchase in 2011 included selling CP (TSX-CP) to rationalize my portfolio (i.e. have few stocks). I have made a 14.9% per year return on my investment. Of my return some 1.62% is attributable to dividends. That is just under 11% of my return is from dividends.

As is typical of stocks were insiders get options, they sell them. When I look at the insider trading, I find $39.3M of insider selling by CEO, officers and directors. There is some insider buying also, but at $2.3M it is completely dwarfed by the selling. The buying is by officers and directors. There are 472 institutions that hold 56% of the shares of this company.

I get 5 year median low and high Price/Earnings Ratio of 10.73 and 14.80. So the current P/E ratios of 14.64 would appear to be relatively high and would show a high stock price. I get a 10 year median Price/Book Value Ratio of 2.32. The current one of 3.22 is almost 40% higher and therefore shows a relatively high stock price.

I get a Graham price of $53.72 and the stock price of $77.75 is 31% higher. The high difference between the Graham Price and the stock price is the stock price being 35% higher. This would also indicate a relatively high stock price. The only place that shows a relatively low stock price is the dividend yield. The 5 year median dividend yield is 1.78% and the current one is 1.93%, which is some 8% higher. However, the dividend yield has been going up over time.

When I look at analysts’ recommendations, I find Strong Buy, Buy, Hold, Underperform and Sell recommendations. In other words they are all over the place. However, the vast majority is in the Hold category with the other categories only having 1 or 2 analysts. The consensus recommendation would be a Hold. One analysts said it was a short term Hold, but a long term Buy.

A buy recommendation came with a 12 months stock price of $89 and a Hold at 79.68. One buy says that CNR is selling at a discount to Canadian Pacific (TSX-CP) and he is right. I get a P/E of 17.14 for CP. One Strong Buy says that CNR will continue to improving their operating ratio. He also thought it was the best railroad company in North America. (I certainly thought it was better than CP and that is why I rationalized by stock portfolio by selling CP and buying more CNR.)

The Passive Income Earner picked CNR as one of his three stocks for the Dividend Growth Index. See his site.

I am pleased with this stock and will continue to hold on to my shares in this company.

Canadian National Railway Company and its operating railway subsidiaries, spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. Its web site is here Metro. See my spreadsheet at cnr.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 for stocks followed and investment notes. Follow me on twitter.

1 comment:

  1. Like the game Monopoly, I need to own a railroad at some point. It's that simple - they are a staple for any long-term dividend invesetor and it's currently a void in my portfolio.

    Great review, as usual Susan.