Is it a good company at a reasonable price? I believe if you like a stock and would like to hold for a long period of time, the time to buy is when it is reasonable or cheap. In a portfolio, it is probably a good idea to have either this stock or Canadian Pacific Kansas City Ltd, but not both. I went with CNR personally. I think this is a stock to hold for the long term. Currently the price is reasonable. However, it might be cheap as the dividend yield tests are showing.
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 done well with this investment. I have had this stock since 2005 and made a second investment in 2009. I have a total return of $14.26% per year with 11.56% from capital gains and 2.70% from dividends.
If you had invested in this company in December 2014, for $1,040.26 you would have bought 13 shares at $80.02 per share. In December 2024, after 10 years you would have received $293.80 in dividends. The stock would be worth $1,897.61. Your total return would have been $2,191.41. This would be a total return of 8.25% per year with 6.20% from capital gain and 2.06% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $80.02 | $1,040.26 | 13 | 10 | $293.80 | $1,897.61 | $2,191.41 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.45%. The 5, 10 and historical median dividend yields are low (below 2%) at 1.89%, 1.87% and 1.67%. The dividend growth is moderate (8% to 14% per year) at 9.5% per year over the past 5 years. The last dividend increase was in 2025 and it was for 5.03%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2024 for Earnings per Share (EPS) is good at 48% with 5 year coverage at 40%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is good at 48% with 5 year coverage at 43%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 33% with 5 year coverage at 29%. The DPR for 2024 for Free Cash Flow (FCF) is too high at 69% with 5 year coverage at 52%. There is no agreement on what the FCF is, but they are relatively close.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 48.22% | 40.81% |
| AEPS | 47.61% | 43.16% |
| CFPS | 33.38% | 29.39% |
| FCF | 69.15% | 52.62% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2024 is good at 0.22 and currently at 0.21. The Liquidity Ratio for 2024 is too low at 0.66 and 0.66 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.81 and currently at 1.81. The Debt Ratio for 2024 is good at 1.58 and 1.58 currently. The Leverage and Debt/Equity Ratios for 2024 are fine at 2.71 and 1.71 and currently at 2.71 and 1.71.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.22 | 0.21 |
| Intang/GW | 0.01 | 0.00 |
| Liquidity | 0.66 | 0.66 |
| Liq. + CF | 1.81 | 1.81 |
| Debt Ratio | 1.58 | 1.58 |
| Leverage | 2.71 | 2.71 |
| D/E Ratio | 1.71 | 1.71 |
The Total Return per year is shown below for years of 5 to 28 to the end of 2024. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 9.47% | 6.64% | 4.44% | 2.20% |
| 2014 | 10 | 12.95% | 8.25% | 6.20% | 2.06% |
| 2009 | 15 | 13.51% | 13.92% | 11.46% | 2.46% |
| 2004 | 20 | 15.33% | 13.05% | 10.88% | 2.17% |
| 1999 | 25 | 15.12% | 15.73% | 13.25% | 2.47% |
| 1996 | 28 | 15.05% | 15.61% | 13.24% | 2.37% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 18.67, 21.28 and 24.31. The corresponding 10 year ratios are 16.92, 18.85 and 21.00. The corresponding historical ratios are 12.32, 14.67 and 17.34. The current P/E Ratio is 18.15 based on a stock price of $145.02 and EPS estimate for 2025 of $7.99. The current ratio us 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 19.80, 22.85 and 25.30. The corresponding 10 year ratios are 18.02, 20.34 and 22.54. The current P/AEPS Ratio is 18.06 based on a stock price of $145.02 and AEPS estimate for 2025 of $8.03. The current 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.
I get a Graham Price of $77.83. The 10-year low, median, and high median Price/Graham Price Ratios are 1.75, 2.04 and 2.28. The current P/GP Ratio is 1.86 based on a stock price of $145.02. 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 4.43. The current ratio is 4.33 based on a stock price of $145.02, Book Value of $21,051M and Book Value per Share of $33.53. The current ratio is 2% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2025 of $32.72. This implies a ratio of 4.43 with a stock price of $145.02 and Book Value of $20,534M. This is the same ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.81. The current P/CF Ratio is 12.069 based on Cash Flow per Share estimate for 2025 of $11.43, Cash Flow of $7,177M and a stock price of $145.02. The current ratio is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.67%. The current dividend yield is 2.45% based on dividends of $3.31 and a stock price of $145.02. The current dividend yield is 47% 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 1.83%. The current dividend yield is 2.45% based on dividends of $3.31 and a stock price of $145.02. The current dividend yield is 31% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 5.81. The current P/S Ratio is 5.06 based on Revenue estimate for 2025 of $17,979M, Revenue per Share of $28.63 and a stock price of $145.02. The current ratio is 13% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable and below the median, but maybe cheap. The dividend yield testing is saying that the stock price is relatively cheap. The P/S Ratio testing is saying it is reasonable, but below the median. All the rest of the testing is saying that the stock price is reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (9), Buy (8), Hold (14), Underperform (1) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $167.90 with a high of $200.00 and low of $123.00. The consensus stock price of $167.90 implies a total return of 18.23% with 15.78% from capital gains and 2.45% from dividends.
The year starts off for Analysts on Stock Chase as a Buy and turns into Do Not Buy. Some analysts like CP better and some are worried about the US Tariffs. Stock Chase gives this stock 5 stars out of 5. Sneha Nahata on Motley Fool thinks this is the smartest dividend stock to buy for future dividend payouts. Tony Dong on Motley Fool like CNR better than CP as it does more business across Canada than into the US. The company put out a press release via Global Newswire about their results for the fourth quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this 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 Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF) … learn more. The next stock I will write about will be Canadian Pacific Kansas City Ltd (TSX-CP, NYSE-CP) … learn more on Monday, February 10, 2025 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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.
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