Canadian
National Railway operates Canada ’s
largest railroad system spanning the East/West width of the country plus a
North/South axis that runs through the US mid West to the Gulf of Mexico .
The railroad has grown its profits and dividends at a 16-20% pace over
the past 10 years earning a 14-18%+ return on equity. Going forward, earnings should increase at an
above average pace as result of:
(1) volume
growth and improved pricing that accompanies [a] the new Prince Rupert
Intermodal Terminal, a new container terminal that provides the fastest and
most cost effective route between Asia and the interior of North America, [b]
increased resource demand particularly in thermal coal and grains and [c]
rising demand for metals and fertilizer,
(2) aggressive
productivity improvement such as the SmartYard technology, precision
engineering, shop consolidation, train length, car velocity, fuel productivity,
extended sidings and yard integration,
(3) cost control
measures.
(4) an ongoing share repurchase
program.
Negatives:
(1) intense
competition,
(2) the company
is unionized and therefore subject to strikes, work stoppages, etc.
(3) it is
subject to the volatility in currency and fuel prices.
The company is
rated A by Value Line, has a debt/equity ratio of approximately 34% and its
stock yields 1.5%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2004
Ind Ave 1.8 13 27 NA
Debt/ EPS Down
Net Value Line
Equity ROE Since 2004 Margin Rating
Ind Ave 43 17 NA 16 NA
Chart
Note:
CNI stock made great progress off its March 2009 low, quickly surpassing the
downtrend off its May 2008 high (straight red line) and the November 2008
trading high (green line). Long term,
the stock is in an uptrend (blue lines).
Intermediate term, it is in an uptrend (purple lines). The wiggly red line is the 50 day moving
average. The Dividend Growth Portfolio
owns a 75% position in CNI---having Sold Half in mid-2011 and benefitted from
subsequent higher prices. The upper
boundary of its Buy Value Range is $31; the lower boundary of its Sell Half
Range is $62.
2/14
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