Canadian Pacific Railway

Sound bite for Twitter and StockTwits is: Dividend Growth Stock. See my spreadsheet on Canadian Pacific Railway.

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

This company has been paying dividends from 2002. It has often raised its dividends, but not every year. They did not raise dividends in 2009. Also 2012 is the last year they raised dividends. That raise was for 16.7%. Some analysts feel that CP will again raise dividends, possibly this year.

The dividend yield is low and the dividend increases are moderate. The current dividend is 0.72% based on a stock price of $194.73 and dividends of $1.40. The 5 year median dividend is 1.77% and the historical median dividend yield is 1.53%. The dividends have grown by 7.18% and 10.41% per year over the past 5 and 10 years.

The Dividend Payout Ratios are low. The DPR for 2014 for EPS was 16.5% and for CFPS was 10.4%. The 5 year median DPR for EPS is 28.23% and for CFPS 15.95%. The DPR are expected to be lower in 2015.

Outstanding shares have not changed much (under 0.5%) over the past 5 and 10 years. Outstanding shares have increased by Stock Options and Share Issues and have decreased by Buy Backs. Revenue growth is moderate to good. Earnings growth is good. Cash Flow growth is good.

Revenue is up by 9% and 5.4% per year over the past 5 and 10 years. Revenue per Share growth is 9.3% and 5% per year over the past 5 and 10 years. Analysts expect revenues to grow by around 3.4% in 2015. If you look at the 12 month period to the end of the third quarter and the 12 month period to the end of 2014, revenue is up by 2.5%.

EPS have grown at the rate of 18.2% and 12.5% per year over the past 5 and 10 years. Analysts expect growth in EPS for 2015 to be around 15.5%. If you look at the 12 month period to the end of the third quarter and the 12 month period to the end of 2014, EPS is up by 5.7%.

Cash Flow is up by 36.3% and 10% per year over the past 5 and 10 years. Analysts expect growth of around 18.9% for 2015. If you look at the 12 month period to the end of the third quarter and the 12 month period to the end of 2014, cash flow is up by 17.4%.

Return on Equity for 2014 was 26.3%. The 5 year median ROE is 14.9%. However, the ROE on comprehensive income is a lot lower. The ROE on comprehensive income for 2014 was 13.5% and the 5 year median is 8.9%. The lower ROE on comprehensive income suggests that earnings may not be as good as they seem. This is a cautionary point.

The debt ratios are fine, but could be better. The Liquidity Ratio for 2014 is 0.91. If you add in cash flow after dividends, the ratio is 2.24. This means that the company counts on cash flow to cover current liabilities because current assets cannot do so. The Debt Ratio is good at 1.51. I would prefer the Leverage and Debt/Equity Ratios to be lower, but they are at a normal level for this company at 2.97 and 1.97.

This is the first of two parts. The second part will be posted on Friday, October 23, 2015 and will be 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 Railway.

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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