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Railway Battle: CNR vs CP

RailwayI am in the market for some railway and since I was going to research our two Canadian players (Canandian National Railway & Canadian Pacific Railway) I thought I’d make it a battle! Are you in the market for a railway company in your portfolio? If you are, read on and find out about them.

By the way, if you want to get access to some quick stock research on a technical front, try one of the services below:

Railroad Business

Railroads have been the foundation of long distance transportation for a very long time and even now, it is still providing a consistent mean of transportation for goods across North America. I like the business model and I really don’t see it go away any time soon. It makes for a sustainable business and one that we must rely on and that’s why I want to have a railroad business in my portfolio. I started with utilities and banks for the reason that they are required and dependable and railroads fall into that model.

Even Warren Buffett has a strong appreciation for the railroad business. Just Google it and you’ll see numerous references. That alone shouldn’t be a reason to invest but a strong insight nonetheless coming from the ‘Oracle Of Omaha’.

CNR vs CP

It’s time for the numbers. Here is the quick comparison between the two companies. As you can see, it’s a win by knock out for Canadian National Railway. If you put aside all the news around the struggle within management and a large stock owner, the numbers alone are highlighting CNR as a healthier and more profitable company.

In CNR, we happen to have a candidate for the 10/10 rule. The 10/10 rule is about having a 10% dividend growth average over 10 years and CNR achieves just that. That 10% growth definitely beats inflation form an income perspective and when you re-invest your dividends, you have a really good compound growth rate.

The potential for business is much higher with CNR considering they server 75% of the US population whereas CP operates in 6 provinces and 13 states. Their railroad routes definitely highlights their potential for business growth and their size. I would say that CNR has an economic moat on the railway transportation sector across North America.

CNR.TOCP.TOWinner
Stock Price$84.39$76.68-
Market Capitalization37.0213.11CNR
P/E14.7819.32CNR
FP/E13.2214.62CNR
EPS$5.71$3.97CNR
Liabilities-to-Equity Ratio1.442.04CNR
Dividend Yield1.80%1.56%CNR
Dividend Payout Ratio23.85%34.72%CNR
10 Year Dividend Growth17.75%3.79%CNR
5 Year EPS Growth7.03%-5.32%CNR
52-Week Range98.52%92.16%-
52-Week High$84.7$79.29-
52-Week Low$63.72$46.01-

Canadian National Railway (CNR.TO or CNI)

CNR Dividend Growth

CNR recently beat earnings and the stock price was rewarded from it as well. In the span of a week the stock is up already 6%. CNR has a consistent track record of growing its dividend annually making it a Canadian Dividend Aristocrat. With an average dividend growth above 10% annually, it also makes it a member of the 10/10 investing rule thus a excellent investment for dividend growth.

On the right, you can see its dividend growth graph for the past 10 years. The recession is practically missing. The consistent growth is what any investor is looking for and the only other company I have seen with such a graph in the Canadian market is Fortis (FTS). From looking at the CNR dividend growth graph on their website, it appears that it even had a 20 year run with a 10% annual dividend hike. That’s some consistency I am willing to invest in.

 

Canadian Pacific Railway (CP)

CP Dividend GrowthCP also beat the expectation but it’s current dispute between management and one of its major owner is stirring trouble. It makes for an uncertain path for many investors and it’s probably why the stock has stayed flat after the earnings.

The dividend growth graph is showing a few hiccups all within a 10 year period. In 2001, there was an anomaly and I could not find the reason for the higher payment either. It followed with a couple of flat years and it did the same during the 2008/2009 economic down turn. That’s a little too much struggle for me when I just look at the dividends – it lack consistency.

Readers: Are you interested in a railway or transportation investment?

Disclamer: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your decision at your own risk – see my full disclaimer for more details.

Image: graur codrin / FreeDigitalPhotos.net

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5 Responses to "Railway Battle: CNR vs CP"

  1. Echo says:

    Nice analysis, PIE. I’m also looking to add a railroad to my portfolio and it looks like CNR fits the bill nicely.

  2. Mike says:

    Funny you should post this when you did, I’ve also been recently considering adding a railroad stock to my portfolio. I’ve been taking a look at the fundamentals of CN and CP, and following the Bill Ackman news. I’ve also been analyzing some US railroad stocks like Union Pacific, just to get an idea of what’s common and what’s exceptional in the railroad industry. For example, it seems like all railroads big and small only have a return-on-assets value of around 7%, so I’m guessing that that’s common for the railroad industry. Probably because they need a large amount of capital invested in rail, engines and rolling stock in order to operate.

  3. I plan on adding CNR to my portfolio as soon as I can afford it. I’d like to see a price dip but I’ll probably be SOL for a while.

  4. Carol says:

    Very helpful post to everyone who will be able to read it I bet they will be happy for you too.

  5. SPBrunner says:

    In around 2001 was when CP split into around 4 or 5 different companies. This explains the anomaly of dividend payments.

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