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.
When I was updating my spreadsheet, I noticed is that estimates for 2021 and 2022 are lower than they were last year. For example, for Revenue for 2021 and 2022 the estimates given last year were $16,548M and $17,403M. This year the estimates for Revenue for 2021 and 2022 are $14,7118M and $15,775M. The estimates for EPS for 2021 and 2022 given last year were $6.87 and $7.56. This year the estimates for EPS for 2021 and 2022 last year estimates are $5.92 and $6.66.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.82%. The 5, 10 and historical dividend yields are also low at 1.86%, 1.76% and 1.60%. The dividend growth over the past 5 years is moderate (8% to 14% ranges) at 13% per year. The last dividend increase was lower at just 7%. This dividend increase was made in 2021.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 is 46% with 5 year coverage at 33%. The DPR for CFPS for 2020 is 28% with 5 year coverage at 24%. The DPR for Free Cash Flow for 2020 is 50% with 5 year coverage at 52%. (Sites seem to agree on FCF.)
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2020 is 0.12 and this is good. The Liquidity Ratio for 2020 is 0.95, but if you add in cash flow after dividends, it is quite good at 2.33. The Debt Ratio is also good at 1.78. Leverage and Debt/Equity Ratios are also fine at 2.28 and 1.28.
The Total Return per year is shown below for years of 5 to 24 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 12.97% | 14.49% | 12.59% | 1.90% |
| 2010 | 10 | 15.59% | 17.50% | 15.48% | 2.02% |
| 2005 | 15 | 15.95% | 14.37% | 12.70% | 1.67% |
| 2000 | 20 | 16.08% | 17.83% | 15.84% | 1.99% |
| 1996 | 24 | 15.90% | 17.28% | 15.41% | 1.87% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.51, 17.83 and 20.15. The corresponding 10 year ratios are 14.90, 17.56 and 19.98. The corresponding historical ratios are 12.16, 13.69 and 15.61. The current P/E Ratio is 22.88 based on a stock price of $135.42, and EPS estimate for 2021 of $5.92. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $60.20. The 10 year low, median, and high median Price/Graham Price Ratios are 1.52, 1.81 and 2.03. The current P/GP Ratio is 2.23 based on a stock price of $135.42. 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 4.24. The current P/B Ratio is 4.89 based on a stock price of $135.42, Book Value of $19,651M, and Book Value per Share of $27.67. The current ratio is 16% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 12.33. The current P/CF Ratio is 15.34 based on a stock price of $135.42, Cash Flow per Share estimate for 2021 of $8.83 and Cash Flow of $6,272M. The current ratio is 24% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 1.60%. The current dividend yield is 1.82% based stock price of $135.42 and dividends of $2.46. The current dividend yield is 14% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 1.76%. The current dividend yield is 1.82% based stock price of $135.42 and dividends of $2.46. The current dividend yield is 3% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 5.23. The current P/S Ratio is 6.54 based on Revenue estimate of $14,711M, Revenue per Share of $20.71 and a stock price of $135.42. The current ratio is 25% above the 10 year median ratio. This stock price testing suggests that the stock price is expensive.
Results of stock price testing is that the stock price is probably reasonable to expensive. The dividend test say it is reasonable. Dividends and especially recent increases reflect the company’s management view of the future. They increased their dividends in 2021, but at a lower level than in 2019 and last 5 year increases per year. The P/S Ratio test does not confirm this and says that the stock price is expensive which is also the result of the other tests except the P/B Ratio test.
Is it a good company at a reasonable price? I still like this company and I plan to continue to hold it. It is a dividend growth stock, which is what I like. However, the current stock price might be on the expensive side, but it is not far into the expensive territory. The current P/S Ratio is 24% above the 10 year ratio and the cut off to expensive is 20%.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5), Hold (21), Underperform (1), and Sell (1). The consensus would be a Hold, but as you can see the recommendations are all over the place. The 12 month stock price consensus is $143.31. This implies a total return of 7.64% with 5.83% from capital gains and 1.82% from dividends.
Analysts thinks it is a buy on Stock Chase, but one also sees it as expensive. Stock Chase gave this stock 5 stars out of 5. Bill Gates just sold a part of his stake in this company according to Joey Frenette on Motley Fool. However, he does not see that in a negative light and still thinks you should buy this stock. The Executive Summary on Simply Wall Street gives this stock 3 stars out of 5 and gives it one risk item. A writer on Simply Wall Street is disappointed in recent lack of earnings growth, but says analysts expect this to change. Scott Rubin reviews this stock on You Tube.
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 Canadian Pacific Railway (TSX-CP, NYSE-CP) ... learn more. The next stock I will write about will be Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF) ... learn more on Friday, February 12, 2021 around 5 pm. Tomorrow on my other blog I will write about Toromont and Finning.... learn more on Thursday, February 11, 2021 around 5 pm.
Also, on my book blog I have put a review of the book Murdered Midas by Charlotte Gray learn more...
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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