Canadian National Railway

I own this stock (TSX-CNR). 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.

If you had invested in the company over the past 5 or 10 years, you would have made a return of 11.6% and 13.8% per year respectively. Of this return, 1.7% and 1.6% per year would be attributed to dividends and that is 15% and 11.2% of your total return.

This company has a very good record of increasing dividends each year. Over the past 5 and 10 years, dividends have been increased at the rate of 14.9% and 17.5% per year, respectively. For the first dividend payable in March 2012, they have raised the dividend by 15.4%. They have raised their dividends every year over the past 16 years since their Initial Public Offering (IPO).

The dividend yield is rather low with a 5 year median of 1.78% and a current one of 1.93%. The Dividend Payout Ratios are relatively low with 5 year median DPR for earnings at 24% and for CF at 19%. This stock would be considered a dividend growth stock. Both dividend yield and DPRs have been steadily increasing over the years.

The number of shares outstanding has been going down with a 10 year median per year reduction of 3%. They have been giving out stock options, but have been repurchasing more shares than they have given out in stock options. So, when you look at revenue and revenue per share, they are quite different. The revenue has only been increasing at the rate of 3% and 4.8% per year over the past 5 and 10 years. Revenue per share has increased at the rate of 6.3% and 7.6% per year over the past 5 and 10 years.

The 5 and 10 year growth in Earnings per share is 6.7% and 12% per year, respectively. The 5 and 10 year growth in cash flow is 4.7% and 7.9% per year, respectively. The growth in book value is 4.7% and 6.4% per year, respectively.

The Return on Equity for the financial year ending in December 2011 was very good at 23%. Stock has a 5 year median ROE, which is also quite good at 18.7. The ROE based on comprehensive income is good, but lower at 12.4% for both the end of 2011 and for a 5 year median value.

When looking at the debt ratios, I find that the Liquidity Ratio to be usually be quite low. The current one is just 1.08. However, if you take into consideration their cash flow (after dividends); the ratio is much better and in fact quite good at 2.48. It is also fine if you look at cash flow after dividends and investments at 1.74. The current Liquidity ratio is better than normal.

The Asset/Liability Ratio has always been good and the current one at 1.70 is also good. The Leverage and Debt/Equity Ratios are fine, with current ones close to the 10 year median values. The current ratios are 2.44 and 1.41.

See dividend watch dog’s site about dividends from CN.

I am pleased with my investment in this stock and intend to continue to hold it. Tomorrow, I will look to see what the analysts say about it and what my spreadsheet says about the current stock price.

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.