Canadian National Railway

Sound bite for Twitter and StockTwits is: Dividend growth Industrial. Stock price would have to come down to around $80.00 (a18% drop) to pass all stock price testing test but the P/B Ratio test. To pass that test the price needs to go to around $74.00 (a24% drop). On a lot of measures this stock is currently too high. See my spreadsheet on Canadian National Railway.

This stock is cheap by the dividend yield as there has been nice dividend growth lately. Seldom do companies put up dividends higher than they can afford in the future. With dividend yield testing you are looking at current data. However, the P/B Ratio at 4.35 is high. Also the Dividend Payout Ratio of 34.5% expected for 2018 is higher than it has ever been. But it is still lower than the median for industrial stocks. It is rather unclear if this stock price is too high or not.

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.

I have done quite well with this stock. I have had it for just over 12 years and I have made a total return of 16.85% per year with 14.93% per year from capital gains and 1.92% per year from dividends. My dividends have covered 50% of the cost of my stock. For the stock I bought in 2005, I am making a yield of 10.1% on my original cost. For the stock I bought in 2009, I am making a yield of 8.2% on my original cost.

Dividends yields are low and the dividend growth is good. I consider under2% to be a low yield and growth over 15% to be a good growth. The current dividend is 1.87%; the historical median dividend yield is 1.57% with the 5 and 10 year median dividend yield at 1.61% and 1.78%.

I have dividend growth for the past 5, 10, 15, 20 and 21 years. They are all above 15% except for the 10 year period and it is close. The dividend growth for the past5, 10, 15, 20 and 21 years are 17.08%, 14.66%, 17.69%, 16.59% and 16.51% per year. This is a compounded rate of growth.

This stock has had good long term total returns. The total returns for the past 5, 10, 15, 20 and 21 years are 20.01%, 17.91%, 18.26%, 17.55% and 17.87% per year. The portion of this total return attributable to capital gains is 18.07%, 16.08%, 16.42%, 15.84% and 16.21% per year. The portion of this total return attributable to dividends is 1.93%, 1.83%, 1.84%, 1.71%, and 1.75% per year.

A person who bought this stock when it went public would have earned a total return of 17.87% per year. They would probably be earning a yield on their original investment of 27.4% and their dividends would have covered their cost by 193%. It would have been a very good investment.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.78, 17.28 and 19.90. The corresponding 10 year ratios are 12.32, 13.62 and 15.18. The historical ratios are 11.87, 13.62 and 14.99. The current P/E Ratio is 18.46 based on a stock price of $97.48 and a 2018 EPS estimate of $5.28. This stock price testing suggests that the stock price might be on the high side and relatively expensive.

I get a Graham price of $51.62. The 10 year low, median and high median Price/Graham Price Ratios are 1.32, 1.51 and 1.66. The current P/GP Ratio is 1.89 based on a stock price of $97.48. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 3.33. The current P/B Ratio is 4.35 based on Book Value of $16,656M, Book Value per Share of $22.43 and a stock price of $97.48. A P/B Ratio of 4.35 is a high ratio. This stock price testing suggests that the stock price is relatively expensive.

I get an historical median dividend yield of 1.57%. The current dividend yield is 1.87% based on dividends of $1.82 and a stock price of $97.48. This current dividend yield is some 18.9% higher than the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and bellow the median.

I get a 10 year median Price/Sales (Revenue) Ratio of 4.34. The current P/S Ratio is 5.28 based on 2018 Revenue of $13,712M, Revenue per Share of $18.46 and a stock price of $97.48. This stock price testing suggests that the stock price is relatively expensive.

When I look at analysts' recommendations I find Strong Buy (1), Buy (9) and Hold (13). The consensus would be a Hold. The 12 month stock price is $106.08. This implies a total return of $10.69% with 8.82% from capital gains and 1.87% from dividends.

Jacob Donnelly of Motley Fool likes this stock. Ross Marowits, The Canadian Press in an article on CTV News talks about the company rising dividends by 10% as it expects double digit earnings growth over the next 5 years. Nasdaq Journal Staff on Nasdaq Journal says that the PEG is 1.59 on this stock which means that the stock is overbought (or relatively high). See what analysts are saying about this stock on Stock Chase. They like to stock, but most also mentioned NAFTA. However, if the NAFTA discussion fail analyst think that this would only be a short term set back.

Canadian National Railway Co is engaged in the transport sector. Its primary occupation is the rail and related transportation business. Its web site is here Canadian National Railway .

The last stock I wrote about was about was Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF)... learn more. The next stock I will write about will be Absolute Software Corporation (TSX-ABT, OTC-ALSWF)... learn more on Friday, February 9, 2018 around 5 pm. Tomorrow on my other blog I will write about Something to Buy February 2018... learn more on Thursday, February 8, 2018 around 5 pm.

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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