Linked here is a PDF copy of my detailed analysis of Canadian National Railway Company (CNI ADR:NYSE) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Canadian National Railway Company (CNI) operates Canada's largest railroad, linking customers in Canada, the U.S., and Mexico through approximately 20,400 miles of track.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. CNI is trading at a discount to 2.) and 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, CNI is trading at a 1.5% discount. CNI has a Star added for trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. CNI earned Stars in 1.), 2.) and 3.) above. It has grown its dividends for 12+ years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. CNI did not earn any Stars in this section. With a current yield of 1.8%, has a NPV MMA Diff. of $8,246 (per thousand), which is less than the $10,000 threshold needed to earn a Star. Based on its current yield and estimated growth rate of 17.7%, it will take CNI 11 years to exceed the earnings of a MMA yielding 4.61%.
Other: CNI is not a S&P 500 Dividend Aristocrat or a member of The Broad Dividend Achievers™ Index. S&P's qualitative risk assessment is low based on CNI's strong profitability, cash flow generation, balance sheet and a diverse customer base. CNI is one of the most efficiently run railroads and should be able to maintain its competitive advantage via strict cost controls and efficiency-boosting measures.
Conclusion: Quantitatively, CNI earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned no Stars in the Dividend Income vs. MMA section for a total of four Stars, which rates it as a 4 Star-Buy stock.
My original investment in CNI was in November 2007. My annualized return on CNI from Sep/2007 through Friday is +32.62% with a year-to-date it is a gain of 12.3%. During my short time to hold CNI, I have been well-pleased with its performance. With the CNI trading below the five-year historical average, I will continue to add to my position as my allocation allows and until circumstances dictate a different coarse of action.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I own shares of CNI (1.8% of my Income Portfolio).
What are your thoughts on CNI?
Recent Stock Analyses:
Popular Posts - Last 7 days
Presented below are my dividend stock and ETF/CEF holdings. This is not a recommendation to buy these securities. I have classified some of...
Simple interest is where interest is calculated on the original principal amount and unpaid interest is not added to the principal for futur...
My goals were originally defined in this December 1, 2007 Investing Goals post and last updated in my 2014 Investing Goals . Like last year...
Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those re...
Throughout history there have always been great companies that stand head-and-shoulders above their peers and the competition. They are lov...
Linked here is a detailed quantitative analysis of Cardinal Health, Inc. (CAH). Below are some highlights from the above linked analysis: ...
Linked here is a detailed quantitative analysis of Chevron Corporation (CVX). Below are some highlights from the above linked analysis: C...
Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in November, extending ...
Monday, October 31, 2011 will mark my fourth full year of writing as Dividends4Life . It is hard to believe another year has passed. Like th...
Like many that came before me, I am on a journey to construct a portfolio that will provide me... Dividends 4 Life