Canadian Pacific Railway 2

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

When I look at insider trading, I find some $0.8M of insider buying and $532.3M of insider selling. The net insider selling is some 1.5% of the outstanding stocks. I notice that William Ackerman seems to be selling off shares. Last year when I looked he held 13.5% of outstanding shares and now he holds some 8% of the outstanding shares.

The increase in outstanding share due to stock options was 1.5M for 2013 and this is some 0.86% of the outstanding shares as is fine. However, last year shares were increased by 3.9M shares and 2.2% of the outstanding shares and this is a lot. (Anything over 1% is a lot for an increase in outstanding shares for stock options.)

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.84, 17.25 and 20.66. These are moving up as the corresponding P/E Ratios for the past 10 years is at 16.67, 13.79 and 16.67. The current P/E Ratio is 25.03 based on a stock price of $210.49 and 2014 earnings estimates of $8.41. This stock price test suggests that the stock is relatively expensive.

The current Dividend Yield is 0.67% and the 5 year median dividend yield at 1.77% is some 62% higher. The historical average and median Dividend Yield are 1.83% and 1.53%. These are both a lot higher than the current dividend yield. This stock price test suggests that the stock is relatively expensive. Even the historical high at 1.08% is higher than the current yield.

I get a Graham Price of $87.74. The 10 year low, median and high median Price/Graham Price Ratios are 0.85, 1.03 and 1.27. The current P/GP Ratio is 2.40 based on a stock price of $210.49. This stock price test suggests that the stock is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 1.88 and the current P/B Ratio at 5.17 is some 175% higher. This is based on a stock price of $210.49 and BVPS of $40.68. This stock price test suggests that the stock is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price consensus is $230.00. This implies a total return of 9.93% with 9.27% from capital gains and 0.67% from dividends.

This article in the Financial Post talks about the implications of a CP takeover of CSX Corp. The Motley Fool looks at both CP and CN (TSX-CNR).

Sound bit for Twitter and StockTwits is: Stock is relatively expensive. I would not buy this stock at this price because of the low dividend yield. When the dividend yield is below 1% it takes a very long time to earn a descent dividend yield on your original purchase of a stock.

Of course the stock market is still falling and we are at least in a market correction period. Who knows, the stock price might just become a reasonable or even a cheap one if this market correction continues. See my spreadsheet at cp.htm.

This is the second of two parts. The first part was posted on Thursday, October 16, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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 Canadian Pacific.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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