Canadian National Railway 2

On my other blog I am today writing about Canadian Banks and their ratios continue...

I own this stock of Canadian National Railway (TSX-CNR, NYSE-CNI). In 2005 I was look for good companies to buy at a reasonable price. This stock met by criteria. This is a dividend growth company with a good record of dividend increases. I brought some more in 2009.

When I look at insider trading, I find $2.9M of insider buying and $16.6M of insider selling with net insider selling at $13.7M. Since net insider selling is some 0.02% of the stock's market cap, it is relatively a small number.

There is insider ownership with the CEP having shares worth around $5.2M, a director having shares worth around $33.2M and the chairman having shares worth around $16.1M. However, the shares just quoted only add up to 0.08% of the outstanding shares and therefore insider ownership is relatively small.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.25, 13.62 and 15.37. They are slightly higher than the corresponding 10 year P/E Ratios at 12.00, 13.55 and 14.91. The current P/E Ratio is 20.60 based on a stock price of $87.13 and 2015 EPS estimate of $4.23. Looking at my spreadsheet it is easy to see that the P/E Ratios of 2013 and 2014 are higher than they have been in the past. This stock price test suggests that the stock is relatively expensive.

I get a Graham Price of $36.40. The 10 year low, median and high median Price/Graham Price Ratios are 1.08, 1.23 and 1.42. The current P/GP Ratio is 2.39 based on a stock price of $87.13. This stock price test suggests that the stock is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 2.57. The current P/B Ratio is 5.24 based on a BVPS of $16.64 and a stock price of $87.13. The current P/B Ratio is some 103% higher than the 10 year median P/B Ratio. This stock price test suggests that the stock is relatively expensive.

The 5 year median, the historical average and the historical median dividend yields are 1.77%, 1.57% and 1.44%. The current dividend yield is 1.43% based on a stock price of $87.13 and a dividend of $1.25. The current dividend is some 19%, 8.3% and 0.04% lower than the current dividend. The first test suggests that the dividend yield shows a relatively high price, but the last two look towards a more reasonable price.

Also it is interesting to note that the median dividend yield based on the year end closing price is at 1.42%, a value just below the current dividend yield of 1.43%.

When I look at the analysts' recommendations I find Strong Buy, Buy and Hold recommendations. All but a few of the recommendations are a Hold. The consensus recommendation is a Hold. The 12 month stock consensus price is $80.70. This implies a loss of 5.95% with 1.43% from dividends and a capital loss of 7.38%.

In a recent report, Andrew Walker of the Motley Fool says there is a possibility of share appreciation and big dividend hikes with this company. In a recent article by Carolyn King in the Wall Street Journal, she says CNR is ahead in moving grain against government mandated targets. A January article by Kristine Owram in the Financial Post talks about the recent 25% dividend hike by CNR as the biggest in the company's history.

Sound bite for Twitter and StockTwits is: Stock price is reasonable to expensive. My favourite tests involve using the dividend yield and using this measure, especially the historical median dividend yield, the stock price becomes reasonable. See my spreadsheet at cnr.htm.

This is the second of two parts. The first part was posted on Tuesday, February 10, 2015 and is available here. The first part talks about the stock and the second part talks about the 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 CNR.

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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