Is it a good company at a reasonable price? I do like the idea of being invested in one of our railway companies and I happen to pick CNR. I think that the stock price on this company is currently in the reasonable range.
The analysts’ recommendations are all over the place with most being at Hold. It probably comes down to how a person determines if the price is high or low or reasonable. Most people look at P/E Ratio but this is not my favourite method. My favourite is the 10 year median dividend yield test. I also like this test confirmed somewhat by the P/S Ratio test. You might want to check and make sure a company can afford their dividends when you use the dividend yield test. This company can afford its dividends.
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 I have had this stock for just over 18 years and to the end of 2023, I have a total return per year of 15.25% with 13.09% from capital gains and 2.16% from dividends.
If you had invested in this company in December 2013, for $1,029.52 you would have bought 17 shares at $60.56 per share. In December 2023, after 10 years you would have received $343.74 in dividends. The stock would be worth $2,831.55. Your total return would have been $3,175.09. This Total Return would be a total return of 12.64% per year with 10.65% from capital gain and 2.00% from dividends. This calculation takes into consideration stock splits, which means that the original cost would be lowered by these splits.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $60.56 | $1,029.52 | 17 | 10 | $343.74 | $2,831.35 | $3,175.09 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.03%. The 5, 10 and historical dividend yields are low (below 2%) at 1.89%, 1.80% and 1.67%. The dividend growth is moderate (8% to 14% ranges) at 11.7% per year over the past 5 years. The last dividend increase was in 2024 and it was a 7% increase.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 37% with 5 year coverage at 38%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 43% with 5 year coverage at 41%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 31% with 5 year coverage at 28%. The DPR for 2023 for Free Cash Flow (FCF) is high at 90% with 5 year coverage fine at 57%. But there no agreement on FCF.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 37.05% | 38.59% |
| AEPS | 43.41% | 41.05% |
| CFPS | 30.74% | 27.78% |
| FCF | 90.08% | 57.44% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.15. The Liquidity Ratio for 2023 is too low at 0.61. If you added in Cash Flow after dividends, the ratios are fine at 1.59. The Debt Ratio for 2023 is good at 1.62. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.62 and 0.62.
| Type | Year End |
|---|---|
| Lg Term R | 0.15 |
| Intang/GW | 0.01 |
| Liquidity | 0.61 |
| Liq. + CF | 1.59 |
| Debt Ratio | 1.62 |
| Leverage | 2.62 |
| D/E Ratio | 1.62 |
The Total Return per year is shown below for years of 5 to 27 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 11.67% | 12.58% | 10.50% | 1.86% |
| 2013 | 10 | 13.90% | 12.64% | 10.65% | 2.09% |
| 2008 | 15 | 13.71% | 16.65% | 14.31% | 2.04% |
| 2003 | 20 | 15.82% | 15.43% | 13.36% | 2.07% |
| 1998 | 25 | 15.38% | 15.74% | 13.74% | 1.95% |
| 1996 | 27 | 15.36% | 16.41% | 14.32% | 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 16.51, $18.43 and 21.00. The corresponding historical ratios are 12.25, 14.67 and 17.16. The current ratio is 20.84 based on a stock price of $166.65 and EPS estimate for 2024 of $8.00. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 18.62, 21.46 and 23.19. The corresponding 10 year ratios are 17.50, 19.83 and 22.28. The current ratio is 20.78 based on stock price of $166.65 and AEPS for 2024 of $8.02. This ratio is between the low and median ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. Note: The AEPS is thought to be a better measure than the EPS.
I get a Graham Price of $75.15. The 10-year low, median, and high median Price/Graham Price Ratios are 1.69, 1.97 and 2.24. The current P/GP Ratio is 2.22 based on a stock price of $166.65. This 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 4.40. The current P/B Ratio is 5.32 based on a Book Value of $20,117M, Book Value per Share of $31.30 and a stock price of $166.65. The current ratio is 21% above the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2024 of $29.30. This implies a P/B Ratio of 5.69 and Book Value of $18,831M with a stock price of $166.65. The ratio is 29% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. These ratios are high when a normal ratio is considered to be around 1.50.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.44. The current P/CF Ratio is 14.12 based on a stock price of $166.65, Cash Flow per Share estimate for 2024 of $11.80 and a Cash Flow of $7,584M. The current ratio is 5.1% 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 1.67%. The current dividend yield is 2.03% based on dividends of $3.38 and a stock price of $166.65. The current dividend yield is 21% 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 1.80%. The current dividend yield is 2.03% based on dividends of $3.38 and a stock price of $166.65. The current dividend yield is 13% above the 10 year 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 5.81. The current P/S Ratio 6.04 based on a Revenue estimate for 2024 of $17,733M, Revenue per Share of $27.59 and a stock price of $166.65. The current ratio is 4% 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 dividend yield tests say cheap to reasonable, with the 10 year dividend yield test at reasonable and below the median. The P/S Ratio test says the stock price is reasonable but above the median (but not by much). The rest of the tests vary from cheap to expensive.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (4), Hold (23) and Underperform (2). The consensus would be a Hold. The 12 month stock price consensus is $174.90 with a high of $210.00 and low of $155.00. The consensus price of $174.90 implies a total return of 6.98% with 4.95% from capital gains and 2.03% from dividends.
Some Analysts like this stock on Stock Chase and others do not. Stock Chase gives this stock 5 stars out of 5. Joey Frenette on Motley Fool thinks this is a buy and hold for a lifetime type stock. Amy Legate-Wolfe on Motley Fool thinks this stock if good for the TFSA and buy and hold forever. The company put out a Press Release on their fourth quarter results.
Simply Wall Street via Yahoo Finance reviews this stock and think it is an attractive income stock. They have one warning of has a high level of debt. Simply Wall Street gives this stock 3 and one half stars out of 5.
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 Quebecor Inc (TSX- QBR.B, OTC- QBCRF) ... learn more. The next stock I will write about will be Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF) ... learn more on Friday, February 2, 2024 around 5 pm. Tomorrow on my other blog I will write about Best Blue Chip Canadian Stocks.... learn more on Thursday, February 1, 2024 around 5 pm.
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