Is it a good company at a reasonable price? It is probably a good idea for a dividend growth portfolio to have either this stock or Canadian Pacific Railway (TSX-CP, NYSE-CP). I have had this stock for 17 years and I have been pleased with it. The stock price is probably still reasonable.
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 that revenue was expected to go up 7.6% to $15,578M, but instead it went up 18% to 17,107M.
Also, I noticed that dividends over both the 5 and 10 year period has grown faster than any other item. This is not sustainable. The next fastest growth has been Stock Price. This is also not sustainable. You would think that both will have to slow down in the future. See chart below. However, the dividend payout ratios are currently moderate at 39% for 2022 with 5 year coverage at 36%. Analysts think that the return over the next year will only be around 9% and that is lower than in the past. See chart on total return below.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 31.18% | 5.58% |
| 5 | AEPS Growth | 49.50% | 8.37% |
| 5 | Net Income Growth | -7.15% | -1.37% |
| 5 | Cash Flow Growth | 20.87% | 3.86% |
| 5 | Dividend Growth | 77.58% | 12.17% |
| 5 | Stock Price Growth | 55.18% | 9.19% |
| 10 | Revenue Growth | 72.45% | 5.60% |
| 10 | AEPS Growth | 165.48% | 10.26% |
| 10 | Net Income Growth | 90.97% | 6.68% |
| 10 | Cash Flow Growth | 117.88% | 8.10% |
| 10 | Dividend Growth | 290.67% | 14.60% |
| 10 | Stock Price Growth | 256.12% | 13.54% |
If you had invested in this company in December 2012, for $1,038.80 you would have bought 23 shares at $45.17 per share. In December 2022, after 10 years you would have received $412.16 in dividends. The stock would be worth $3,699.32. Your total return would have been $4,111.48.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $45.17 | $1,038.80 | 23 | 10 | $412.16 | $3,699.32 | $4,111.48 |
I have held this stock for just over 17 years and have made a total return of 15.73% per year 13.68% from capital gains and 2.05% from dividends. On this stock, I am making a yield of 16% on my original investments. My original yield was 1.39%. It is a low yield stock with good growth.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.98%. The 5, 10 and historical yields are low (below 2%) at 1.88%, 1.71% and 1.64%. The dividend growth is moderate (8% to 14% growth per year) at 12% per year over the past 5 years. The last dividend increase will be 2023 and it was for 7.9%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 is 39% with 5 year coverage at 38%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 39% with the year coverage also at 39%. The DPR for Cash Flow per Share (CFPS) for 2022 is 29% with 5 year coverage at 36%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2022 is good a low at 0.13. The Liquidity Ratio for 2022 is low at 0.84 but if you add in Cash Flow after dividends, it is good at 2.06. The Debt Ratio is good at 1.73. The Leverage and Debt/Equity Ratios are fine at 2.13 and 1.13.
The Total Return per year is shown below for years of 5 to 26 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 12.17% | 11.05% | 9.19% | 1.86% |
| 2012 | 10 | 14.60% | 15.64% | 13.54% | 2.09% |
| 2007 | 15 | 13.83% | 15.77% | 13.74% | 2.04% |
| 2002 | 20 | 16.29% | 16.64% | 14.57% | 2.07% |
| 1997 | 25 | 15.69% | 16.43% | 14.48% | 1.95% |
| 1996 | 26 | 15.66% | 16.75% | 14.76% | 2.00% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 18.26, 20.97 and 23.26. The corresponding 10 year ratios are 15.82, 18.32 and 21.00. The corresponding historical ratios are 12.22, 14.21 and 16.51. The current P/E Ratio is 20.34 based on a stock price of $159.84 and EPS estimate for 2023 of $7.86. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. It is almost expensive.
I also have Adjusted Earnings per Share Data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 18.06, 20.91 and 23.19. The corresponding 10 year ratios are 16.79, 19.26 and 21.77. The current P/AEPS Ratio is 20.47 based on AEPS estimate for 2023 of $7.81 and a stock price of $159.84. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $74.83. The 10-year low, median, and high median Price/Graham Price Ratios are 1.66, 1.94 and 2.19. The current P/GP Ratio is 2.14 based on a stock price of $159.84. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Book Value per Share Ratio of 4.35. The current P/B Ratio is 5.02 based on a stock price of $159.84, Book Value of $21,384M and a Book Value per Share of $31.87. The current ratio is 15% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have an estimate for the Book Value per Share for 2023 of $31.40. This gives a ratio of 5.09 based on a stock price of $159.84 and Book Value of $21,069M. This ratio is 17% 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 13.06. The current P/CF Ratio is 14.27 based on a stock price of $159.84, Cash Flow per Share estimate for 2023 of $11.20 and Cash Flow of $7,515M. The current ratio is 9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 1.64%. The current dividend yield is 1.98% based on a stock price of $159.84 and dividends of $3.16. The current yield is 20.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 1.71%. The current dividend yield is 1.98% based on a stock price of $159.84 and dividends of $3.16. The current yield is 16% 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 5.66. The current P/S Ratio is 6.10 based on Revenue estimate for 2023 of $17,570M, Revenue per Share of $26.18 and a stock price of $159.84. The current ratio is 7.8% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The 10 year median dividend yield test says the stock price is reasonable and below the median and the P/S Ratio test says it is reasonable and above the median. Most of the other testing, except for the historical median dividend yield test says the stock price is reasonable and above the median.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (2), Hold (22) and Underperform (1). The consensus recommendation would be a Buy. The 12 month stock price is $171.05. This implies a total return of 8.99% with 7.01% from capital gains and 1.98% from dividends.
Analyst on Stock Chase like this stock and think it is a Buy. Stock Chase gives this stock 5 stars out of 5. It is not on Money Sense’s 2022 list. Joey Frenette on Motley Fool says this is a good stock to own in tough times. Adam Othman on Motley Fool thinks this is a stock to buy and hold. The company announces its fourth quarter of 2022 results via Yahoo Finance. Simply Wall Street on Yahoo Finance talks about the last dividend increase for this company. Simply Wall Street has one warning of has a high level of debt.
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 Absolute Software Corporation (TSX-ABST, NASDAQ-ABST) ... learn more. The next stock I will write about will be AGF Management Ltd (TSX-AGF.B, OTC-AGFMF) ... learn more on Wednesday, February 8, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks February 2023.... learn more on Tuesday, February 7, 2023 around 5 pm.
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Can you please explain how do you calculate the Adjusted Profit in this case? Thank you
ReplyDeleteThe adjusted profit is shown in the Management's Discussion and Analysis
ReplyDelete