I do not own this stock of Canadian Pacific Railway (TSX-CP, NYSE-CP). 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 that the stock price on this company has really taken off, especially from 2016. Dividend increases has also been high since 2016.
The dividend yields are low with dividend growth good. The current dividend yield is quite low at just 0.92%. The 5, 10 and historical dividend yields also low at 0.96%, 1.02% and 1.53%. The current dividend increases are good (15% and above) at 16.2% per year over the past 5 years. Historically the growth in dividends went from low to moderate to the good current range.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 17%, with 5 year coverage at 16%. The DPR for CFPS for 2019 is 13% with 5 year coverage at 12%. The DPR for Free Cash Flow for 2019 is 31% with 5 year coverage at 30%. Dividend Coverage Ratio for 2019 is 3.26 with a 5 year ratio of 3.35. The three sites I looked at agree on FCF amounts over the years.
Debt Ratios are fine. The Long Term Debt Market Cap Ratio for 2019 is 0.18 and is low and therefore good. The Liquidity Ratio for 2019 is 0.53. If you add cash flow after dividends it is a good one at 1.66. The Debt Ratio for 2019 is a little low at 1.46. This ratio has always been low. I prefer the last two ratios to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2019 are 3.16 and 2.16 and are a bit high and I prefer them to be under 3.00 and under 2.00. This have been high for sometime with 5 year ratios at 3.08 and 2.08.
The Total Return per year is shown below for years of 5 to 31 to the end of 2019. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 16.15% | 62.63% | 59.87% | 2.76% |
| 2009 | 10 | 11.57% | 20.59% | 19.28% | 1.31% |
| 2004 | 15 | 12.29% | 16.20% | 14.98% | 1.22% |
| 1999 | 20 | 12.51% | 17.52% | 16.00% | 1.52% |
| 1994 | 25 | 12.38% | 16.26% | 14.83% | 1.43% |
| 1989 | 30 | 6.73% | 12.60% | 11.51% | 1.09% |
| 1988 | 31 | 7.23% | 13.16% | 11.88% | 1.27% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 14.10, 16.78 and 19.46. The corresponding 10 year ratios are 14.98, 17.90 and 20.94. The corresponding historical ratios are 11.11, 13.94 and 15.50. The current P/E Ratio is 24.24 based on a stock price of $412.11 and EPS estimate for 2020 of $17.00. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $144.37. The 10 year low, median, and high median Price/Graham Price Ratios are 1.63, 2.01 and 2.37. The current P/GP Ratio is 2.85 based on a stock price of $412.11. 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 5.05. The current P/B Ratio is 7.56 based on a Book Value of $7,465M, Book Value per Share of $54.49 and stock price of $412.11. The current ratio is 50% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 13.09. The current P/CF Ratio is 18.00 based on Cash Flow per Share estimate for 2020 of $22.90, Cash Flow of $3,137M and a stock price of $412.11. The current ratio is 38% above 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 1.53%. The current dividend yield is 0.92% based on dividends of $3.80 and a stock price of $412.11. The current dividend yield is 40% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.02%. The current dividend yield is 0.92% based on dividends of $3.80 and a stock price of $412.11. The current dividend yield is 10% below the 10 year dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 4.55. The current P/S Ratio is 7.42 based on Revenue estimate for 2020 of $7,609M, Revenue per Share of $55.54 and a stock price of $412.11. The current ratio is 63% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. One of the dividends yield tests (historical) says the stock is expensive and the other (10 year) says reasonable but above the median. However, the P/S Ratio test does not confirm the second test results and says the stock price is expensive. All the other rest says the stock price is expensive.
Is it a good company at a reasonable price? I think that it is a good company and it has done well for its shareholders. If I was holding it, I would not sell, but I think it is expensive, so I would not buy anymore at this time.
When I look at analysts’ recommendations, I find Strong Buy (11), Buy (8), Hold (9), Underperform (1) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $396.05. This implies a total loss of 2.97% with a capital loss of $3.90% and dividends of $0.92%.
Analyst like this stock on Stock Chase. Site give it 5 stars out of 5. Jed Lloren on Motley Fool thinks this stock provides an excellent investment opportunity. A writer on Simply Wall Street thought in July 2020 that the P/E of 19.7 was too high. A writer on Simply Wall Street talks about the dividends being well covered by earnings and cash flow. The blogger Dividend Earner has written a blog on this company.
Canadian Pacific Railway Limited, together with its subsidiaries, owns and operates a transcontinental freight railway 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 Wednesday, October 14, 2020 around 5 pm. Today on my other blog I will write about RioCan REIT.... learn more on Tuesday, October 13, 2020 around 5 pm.
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