The Company in a Nutshell
- The company’s transportation activities are well diversified among 7 different industries.
- Both Revenues and Earnings show double-digit growth over the past five years.
- Strong management and conservative cost control make this money-making machine even stronger.
- Download PDF format (Last reviewed: Feb 18th 2020)
|PRO Rating||4||Dividend Yield||1.84%|
|Dividend Safety||4||Dividend Growth Since||1996|
|DDM Valuation||7.93%||Dividend Frequency||Quarterly|
Canadian National’s railway spans Canada from coast to coast and extends through Chicago to the Gulf of Mexico. In 2018, CN delivered 6 million carloads over its 19,600 miles of track. CN derived CAD 14 billion in revenue by hauling intermodal containers (24% of consolidated revenue), petroleum and chemicals (19%), grain and fertilizers (17%), forest products (13%), metals and mining (12%), automotive shipments (6%), and coal (5%). Other items constitute the remaining revenue.
|General Information||GE Data|
|Expected Earnings Date||2020-07-21|
|Next ex-dvd date||N/A|
Canadian National has been known for being the “best-in-class” for operating ratios for many years. CNR has continuously worked on improving its margin. The company also owns unmatched quality railroads assets. With a yield under 2%, we can’t talk about a “strong” dividend payer. However, after digging further, I realized how strong the company’s fundamentals are. CNR has a very strong economic moat as railways are virtually impossible to replicate. Therefore, you can count on increasing cash flow each year. Plus, there isn’t any better way to transport most commodities than by train. The good thing about CNR is that you can always wait for a down cycle to pick-up some shares. Wait for the price to drop a little if you are patient. There’s always a good occasion around the corner when we look at railroads.
|5-Yr Rev. Growth:||4.22%|
|5-Yr EPS Growth:||8.65%|
|5-Yr Div Growth:||16.54%|
Railroad maintenance is capital intensive and could hurt CNR in the future. There is a difficult balance to reach between an efficient operating ratio and well-maintained railroads. Continuous (and substantial) reinvestments are required to maintain its network. However, CNR continues to show one of the best operating ratios of the industry. CNR growth could get hurt from time to time as it highly depends on Canadian resource markets. When the demand is low for oil, forest or grains products, CNR will obviously slow down accordingly. Finally, transportation interruption (such the one happening in early 2020) hurt short-term business. CNR is captive of its best assets; you can’t move railroads!
|Financial Debt to EBITDA (TTM)||1.83|
|Current Ratio (Quarterly)||0.76|
|Free Cash Flow (Quarterly)($B)||0.577|
Dividend Growth Perspective
The management team makes sure to use a good part of its cash flow to maintain and improve railways (its biggest expense) while rewarding shareholders with generous dividend payments. CNR shows impressive dividend records with very low payout ratios. While the business could face headwinds from time to time, its dividend payment will not be affected. Shareholders can expect more double-digit dividend increases.
|Payout Ratio (%)||35.22%|
|Cash Payout Ratio (%)||66.81%|
|Enter Expected Dividend Growth Rate Years 1-10:||10.00%|
|Enter Expected Terminal Dividend Growth Rate:||6.50%|
|Calculated Intrinsic Value OUTPUT 15-Cell Matrix||Metric2||Metric3||Metric4|
|Discount Rate (Horizontal)||Discount Rate (Horizontal)||Discount Rate (Horizontal)|
|Margin of Safety||8.00%||9.00%||10.00%|
|Market Cap ($)||86B|
|Price to Book Ratio||4.57|
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- Dividend triangle chart is updated every 6 months.
- All other metrics are updated every 5 minutes (price) or weekly.
- The PDF format includes only comments (no metrics) and are reviewed every 6 months.