I have done well on this stock. I bought it in 2005 and 2009 for my trading account and both times below the median price. My total return is 16.68% with 1.94% from dividends and 14.74% from capital gains.
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. In my RRSP account, I bought this stock in 2011 and sold in 2013. Reason for sale was to raise money in my RRSP account for future withdrawals. I was looking for something to sell with a low dividend yield.
When I was updating my spreadsheet, I noticed that the revenue per share growth was better than the revenue growth. This is because the company is buying back shares. Revenue over the past 5 and 10 years has grown at 6.25% and 5.38%. Revenue per Share has grown at 9.17% and 8.25%. The true growth are the first figures and the ones to pay attention to.
The dividend yield on this stock is low. The current yield is 1.96% with 5, 10 and historical median yields at 1.67%, 1.75% and 1.58%. The yield has not varied much over time, but has occasionally ventured into the 2% range.
Dividend growth has been in the good range (15% and over) most of the time except for the last 10 year period because growth dipped from 2008 to 2010 inclusive. Because the yield is over 1% and the growth is good, the yield has grown well on original price. The 5, 10, 15 and 20 year yield on original (median) price are 3.01%, 8.89%, 13.51% and 29.02%. This is why you want to buy a stock with a low yield and good growth. This is especially true if you are building a portfolio.
I think that they can afford their dividends. The Dividend Payout Ratio for 2018 for EPS is 31% with 5 year coverage at 28%. The DPR for 2018 for CFPS is 23% and the 5 year coverage is 20%.
Most of the Debt Ratios are good. The Long Term Debt/Market Cap Ratio is very low at 0.16. The Debt Ratio for 2018 is good at 1.75 with 5 year median at 1.74. This is a good ratio. Leverage and Debt/Equity Ratios are normal for this sort of company at 2.34 and 1.34 respectively. The 5 year median is basically the same at 2.35 and 1.35.
The Liquidity Ratio is quite low at 0.78. However, if you added in cash flow after dividends the ratios is quite good at 2.09. This means that the company depends on cash flow to pay for current liabilities. This is typical for companies in certain sectors that have a steady cash flow.
The Total Return per year is shown below for years of 5 to 22 to the end of 2018. 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.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.01, 17.83 and 20.07. The 10 year corresponding ratios are 15.53, 15.45 and 17.52. The historical corresponding ratios are 12.00, 13.62 and 15.18. The current P/E Ratio is 17.54 based on a stock price of $109.79 and 2019 EPS estimate of $6.26. This stock price testing suggests that the stock is relatively expensive.
I get a Graham Price of $58.33. The 10 year low, median, and high median Price/Graham Price Ratios are 1.43, 1.63 and 1.82. The current P/GP Ratio is 1.88 based on a stock price of $109.79. This stock price testing suggests that the stock is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 3.78. The current P/B Ratio is 4.51 based on Book Value of $17641M, Book Value per Share of $24.32 and a stock price of $109.79. The current ratio is 19.5% above the 10 year median ratio. This stock price testing suggests that the stock price is reasonable but above the median.
I get an historical median dividend yield of 1.58%. The current dividend yield is 1.96% based on dividends of $2.15 and a stock price of $109.79. The current dividend is 24% above the historical one. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 4.79. The current P/S Ratio is 5.11 based on 2019 Revenue of $15,571M, Revenue per Share of $21.47 and a stock price of $109.79. The current ratio is 6.7% above the 10 year ratio. This stock price testing suggest that the stock price is relatively reasonable, but above the median.
With the testing results on P/E Ratio and P/GP Ratio tests showing the stock price as being expensive, the price is just inside the expensive range. The P/B Ratio tests has a stock price as just below the expensive range. The P/S shows it as reasonable but above the median and the Dividend Yield tests show the stock price as cheap. The stock price is probably not cheap, but it is probably reasonable.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (7) and Hold (14). The consensus would be a Hold. The 12 month stock price consensus is $112.73. This implies a total return of 4.64% with 2.68% from capital gains and 1.96% from dividends.
See what analysts are saying about this stock on Stock Chase. Analysts seem to like this stock. Andrew Walker on Motley Fool thinks this is an attractive stock to buy. Hector Vargas on Simply Wall Street talks about CNR’s ROE. Linda Rogers on What’s on Thorold says analysts are 75% positive on this stock. Canadian Press via The Chronicle Herald says CN Rail infrastructure workers will get a 14% rise over 5 years.
Canadian National's railway spans Canada from coast to coast and extends through Chicago to the Gulf of Mexico. 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 Monday, February 11, 2019 around 5 pm.
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