Is it a good company at a reasonable price? To me, the dividend yield is very low at just 0.66% and on top of that the have stopped raising dividends. I do not know why it still seems to be on the Dividend Aristocrat List. Although the dividends increase over the past 5 years at 9.4% is good, but this is because good increases in 3 to 5 years ago. They also must integrate its purchase of Kansas City Southern railway. I am still happy with having CNR instead of this stock. Currently, this stock is testing as expensive although the stock price has not done much in the last 3 years.
I do not own this stock of Canadian Pacific Kansas City Ltd (TSX-CP, NYSE-CP). I am following this stock because it is a dividend growth stock. It is one that was on Mike Higgs' list. It is a stock I held from 1987 to 1999. 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 this company has stopped raising their dividends. Dividends have been flat since 2021. Analyst think that dividends will be raised in 2024, but they also thought last year that there would be a dividend raise in 2023.
If you had invested in this company in December 2013, for $1,028.16 you would have bought 32 shares at $32.13 per share. In December 2023, after 10 years you would have received $171.84 in dividends. The stock would be worth $3,355.20. Your total return would have been $3,527.04. This would be a total return of 13.47% per year with 12.56% from capital gain and 0.92% 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 |
|---|---|---|---|---|---|---|
| $32.13 | $1,028.16 | 32 | 10 | $171.84 | $3,355.20 | $3,527.04 |
The current dividend yield is low with dividend growth moderate. The current dividend yield is low (below 2%) at 0.66%. The 5, 10 and historical dividend yields are low at 0.83%, 0.89% and 1.23%. The dividend growth is moderate (8% to 14% ranges) at 9.4% per year over the past 5 years. The last dividend increase was in 2021 and it was for 14.5%. Dividends have been flat since then, but analysts expect dividends to increase in 2024.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 18% with 5 year coverage at 18%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 20% with 5 year coverage at 20%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 17% with 5 year coverage at 17%. The DPR for 2023 for Free Cash Flow I got values through TD WebBroker (1) and the company (2). FCF 1 is good at 42% with 5 year coverage at 42%. FCF 2 is good at 34% with 5 year coverage at 31%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 18.05% | 18.49% |
| AEPS | 19.79% | 19.52% |
| CFPS | 17.34% | 17.11% |
| FCF 1 | 42.44% | 42.44% |
| FCF 2 | 34.06% | 30.72% |
Debt Ratios are fine, but I would like Liquidity to be a bit better. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.20 and currently at 0.18. The Liquidity Ratio for 2023 is a low at 0.53 and 0.53 currently. If you added in Cash Flow after dividends, the ratio is low at year end at 1.15 but fine currently at 1.50. The Debt Ratio for 2023 is good at 2.13 and 2.13 currently. The Leverage and Debt/Equity Ratios for 2023 are good at 1.93 and 0.90.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.20 | 0.18 |
| Intang/GW | 0.21 | 0.20 |
| Liquidity | 0.53 | 0.53 |
| Liq. + CF | 1.13 | 1.50 |
| Debt Ratio | 2.13 | 2.13 |
| Leverage | 1.93 | 1.93 |
| D/E Ratio | 0.90 | 0.90 |
The Total Return per year is shown below for years of 5 to 35 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 | 9.40% | 17.78% | 16.70% | 1.09% |
| 2013 | 10 | 10.50% | 13.47% | 12.56% | 0.92% |
| 2008 | 15 | 9.38% | 20.04% | 18.52% | 1.52% |
| 2003 | 20 | 10.56% | 15.45% | 14.25% | 1.21% |
| 1998 | 25 | 11.16% | 17.02% | 15.47% | 1.55% |
| 1993 | 30 | 11.14% | 15.92% | 14.48% | 1.44% |
| 1988 | 35 | 7.14% | 13.15% | 11.92% | 1.24% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 20.25, 22.00 and 24.57. The corresponding 10 year ratios are 17.21, 20.82 and 24.17. The corresponding historical ratios are 12.34, 16.32 and 16.67. The current ratio is 26.91 based on a stock price of $114.75 and EPS estimate for 2024 of $4.26. The current 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 22.45, 24.40 and 26.34. The corresponding 10 year ratios are 16.67, 21.66 and 25.68. The current ratio is 26.02 based on a stock price of $114.75 and AEPS estimate for 2024 of $4.41. This ratio is higher than the 10 high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $66.46. The 10-year low, median, and high median Price/Graham Price Ratios are 1.71, 2.04 and 2.35. The current P/GP Ratio is 1.73 based on a stock price of $114.75. The current 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 10-year median Price/Book Value per Share Ratio of 5.44. The current ratio is 2.58 based on a stock price of $114.75, Book Value of $41,492M, and Book Value per Share of $44.51. The current ratio is 53% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. However, these ratios are quite high for P/B Ratios.
I also have an estimate for the Book Value per Share for 2024 of $48.70. This implies a P/B Ratio of 2.36 with a stock price of $114.75 and Book Value of $45,393M. This ratio is 57% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 14.82. The current ratio is 18.54 based on a stock price of $114.75, Cash Flow per Share estimate for 2024 of $6.19 and Cash Flow of $5,770M. The current ratio is 25% 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 1.23%. The current dividend yield is 0.66% based on a stock price of $114.75 and dividends of $0.76. The current dividend yield is 46% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 0.89%. The current dividend yield is 0.66% based on a stock price of $114.75 and dividends of $0.76. The current dividend yield is 26% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 5.72. the current P/S Ratio is 7.29 based on a stock price of $114.75, Revenue estimate for 2024 of $14,666M and Revenue per Share of $15.73. The current ratio is 28% 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 relatively expensive. The dividend yield tests say this and it is confirmed by the P/S Ratio testing. The other tests are a mixed bag from Cheap to Expensive. In is interesting that the Price/Graham Price Ratio test says the stock price is reasonable, but the Book Values are quite high.
When I look at analysts’ recommendations, I find Strong Buy (13), Buy (8), Hold (11) and Underperform (1). The consensus would be a Buy. The 12 month stock price consensus is $116.30 with a high of $127.00 and low of $95.00. The consensus price of $116.30 implies a total return of 2.01% with 1.35% from capital gains and 0.66% from dividends. The consensus 12 month stock price and lots of Strong Buys do not really go together?
Some analysts like this stock on Stock Chase, some do not and some like CNR better. Stock Chase gives this stock 5 stars out of 5. It is on the Money Sense List and the Dividend Aristocrats List. Aditya Raghunath on Motley Fool says that price might be high, but the company is expected to grow strongly over the next 5 years. Amy Legate-Wolfe on Motley Fool thinks this is a great investment choice. The company put out a Press Release about their fourth quarter of 2023.
There is a report by Simply Wall Street on this stock. Simply Wall Street shows two risks of debt is not well covered by operating cash flow; and large one-off items impacting financial results. Simply Wall Street gives this stock 2 and one half stars out of 5.
Canadian Pacific Kansas City is a Class-1 railroad operating on track that spans across most of Canada and into parts of the Midwestern and Northeastern United States and down through Texas, the Gulf of Mexico, and into Mexico. Its web site is here Canadian Pacific Kansas City Ltd.
The last stock I wrote about was about was AGF Management Ltd (TSX-AGF.B, OTC-AGFMF) ... learn more. The next stock I will write about will be Cogeco Communications Inc (TSX-CCA, OTC- CGEAF) ... learn more on Friday, February 9, 2024 around 5 pm. Tomorrow on my other blog I will write about Something to Buy February 2024 .... learn more on Thursday, February 8, 2024 around 5 pm.
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