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.
When I was updating my spreadsheet, I noticed earnings and stock prices are up nicely (green). Revenue is up, but not as much (blue) and cash flow is mixed (green and blue). Remember that values in my spreadsheets are colour coded. The 5 year total return on this stock is an astonishing 51%.
Dividend yields are low. The current dividend yield is low at just 0.96%. The 5 year median is also low at 0.95%. The 10 year dividend yield and historical dividend yield are also low at 1.28% and 1.43%. The dividend growth is moderate with the 5, 10 and 15 year growth at 10.33%, 8.97% and 9.98% per year.
They have no problem paying for the dividends. The Dividend Payout Ratio for 2017 is 12.93% with 5 year coverage at 16.41%. The DPR for CFPS is 13.27% with 5 year coverage at 11.515.
The debt ratios are fine and not a concern at the present time. The Long Term Debt/Market Cap Ratio is low at 0.23 in 2017. For this ratio, the lower the better. The Liquidity Ratio is low at 0.64 in 2017 with 5 year median of 0.91. When this ratio is below 1.00, it means that the current assets cannot cover the current liabilities. If you add in cash flow after dividends, the ratio is 1.59. This means that to pay current liabilities, the company depends on cash flow.
The Debt Ratio is a little low at 1.47 in 2017 with 5 year median of 1.47. I prefer this ratio to be 1.50. The Leverage and Debt/Equity Ratios are a little high at 3.13 and 2.13 in 2017. The 5 year median values are a bit better at 2.93 and 1.93, respectively.
The Total Return per year is shown below for years of 5 to 23. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
The shareholders of this stock have done well, especially in the past 5 years.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 10.33% | 51.10% | 48.60% | 2.50% |
| 10 | 8.97% | 14.76% | 13.59% | 1.17% |
| 15 | 9.98% | 15.57% | 14.24% | 1.34% |
| 20 | 14.18% | 13.20% | 0.99% | |
| 23 | 15.32% | 14.39% | 0.94% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 18.54, 23.55 and 28.57. The 10 year corresponding ratios are 13.97, 17.01 and 20.06. The corresponding historical ratios are 11.47, 13.64 and 15.98. The current P/E Ratio is 20.00 based on a stock price of $270.01 and 2018 EPS estimate of $13.50. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $116.97. The 10 year low, median, and high median Price/Graham Price Ratios are 1.52, 1.82 and 2.08. The current P/GP Ratio is 2.31 based on a stock price of $270.01. 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 3.12. The current P/B Ratio is 6.00 based on Price Book Value of $6,574M, Book Value per Share of $45.00 and a stock price of $270.01. The current ratio is some 92% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 1.43%. The current dividend yield is 0.93% based on dividends of $2.60 and a stock price of $270.01. The current yield is some 33% below the historical yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 3.55. The current P/S Ratio is 5.49 based on 2018 Revenue estimate of $7,192M, Revenue per share of $49.23 and a stock price of $270.01. The current ratio is 54% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
All the testing I have done shows that the stock price is relatively expensive. Even on an absolute basis, the current ratios I have looked at are high. For example, on an absolute basis a P/B Ratio is 6.00 is very high and the P/E Ratio of 20 is on the high side. The stock price would have to be below $200 before you get into the reasonable, but still high stock price range.
When I look at analysts’ recommendations I find Strong Buy (7), Buy (14) and Hold (3). The consensus would be a buy. The 12 month stock price is $297.33. This implies a total return of 11.08% with 10.12% from capital gains and 0.96% from dividends.
The company reports via the Canadian Press on Cape Breton Post a response about the threat from the Amazon effect. Samuel Prince on Market Realist talks about CP being a top gainer in carload traffic growth. Karen Thomas on Motley Fool thinks there is a lot of growth yet for railway. See what analysts are saying about this stock on Stock Chase. They like this stock and feel that there is still growth to come, especially with Canada\s lack of pipelines.
Canadian Pacific Railway Ltd is engaged in rail transportation. It provides freight transportation services, logistics solutions, and supply chain expertise in Canada and the United States. Its web site is here Canadian Pacific Railway.
The last stock I wrote about was about was Trigon Metals Inc. (TSX-TM, OTC-PNTZF) ... learn more. The next stock I will write about will be Medtronic PLC (NYSE-MDT) ... learn more on Friday, October 19, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 – David Rosenberg.... learn more on Thursday, October 83, 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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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