Canadian Pacific Railway

On my other blog I am today writing about my friend's art show called Transformations 2013 with closing reception tomorrow on October 11, 2013 ...continue...

I do not currently own this stock of Canadian Pacific Railway (TSX-CP, NYSE-CP). It is a stock I held from 1987 to 1999 so I am following it. I also held it from 2006 to 2011. I decided in 2011 to have only one railway stock and chose CN as my railway stock. CP is a dividend growth stock.

I only have dividends on my current spreadsheet going back 9 years to 2001when CP was spin off of Canadian Pacific Limited (CPL). However, the company has a long history of paying dividends. It had a history of good dividend increases when I bought it in 1987. Over the past 5 and 9 years dividends have increased by 8% and 11% per year.

The dividends are rather low with the 5 year median dividend yield at 1.78%. The increase is moderate so you could probably expect a yield on your original investment of around 3.5% after 10 years and just over 5 after 15 years. The current yield is towards the low end for this stock at around 1.03%. The Dividend Payout Ratios are good with 5 year median values of 24% for earnings and 34% for cash flow.

Total earnings over the past 5 and 10 years have been very good because the stock increased by some 46% in 2012 and some 34% so far this year. The total return to date over the past 5 and 10 years is 35.89% and 15.43% per year with the dividend portion at 2.15% and 1.41% per year and the capital gains at 33.74% and 14.02% per year over this period.

The outstanding shares have increased by 2.6% and 1% per year over the past 5 and 10 years. Shares have increased due to Stock Options and Share Issues and decreased due to Buy Backs. Growth in revenue, earnings and cash flow has run from negative to mediocre over the past 5 and 10 years.

Using 5 year running averages, the revenue per share has grown at 2.2% and 2.8% per year over the past 5 and 10 years. Over this period, earnings are down by 2% per year for the past 5 years and up by 6.9% per year over the past 10 years. Cash Flow is down by 3.9% and up by 0.5% per year over the past 5 and 10 years. This is not a great showing. Analysts expect better growth for 2013, but not anything astounding.

The Return on Equity is fine coming in at 9.5% for 2012 with a 5 year median of 10.8%. The ROE on comprehensive income for 2012 is only 6.6% lower, which is also the median difference between the ROE on comprehensive income and net income.

The Liquidity Ratio at 1.31 is mediocre, but this ratio has always been mediocre. The Debt Ratio is fine at 2.71. The current Leverage and Debt/Equity Ratios are also fine at 2.71 and 1.71.

This stock has had an astonishing rise lately with perhaps some revenue and cash flow growth to support it. There has yet to be some earnings growth to support the recent rise in stock price, but analysts' do expect good earnings this year and the first two quarters have seen good growth in earnings.

I guess that 2013 will start to show if the huge rise in stock price is justified. See my spreadsheet at cp.htm.

This is the first of two parts. Second part will be posted on Friday, October 11, 2013 and will be here.

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. Northeast and Midwest 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 here CPR.

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 or StockTwits.