For our latest recommendation, we travel in search of a quality fixed-income investment that provide...
Hop Aboard Canadian National
06/18/2015 10:00 am EST
Our newest featured recommendation is a true backbone of the North American economy, transporting more than C$250 billion worth of goods annually, notes Ingrid Hendershot, editor of Hendershot Investments.
Founded nearly 100 years ago, Canadian National Railway (CNI) now spans eight Canadian provinces as well as 16 US states, transporting freight traffic over an approximately 20,000 mile rail network that reflects more than $8 billion of acquisitions since 1998.
Operating the largest rail network in Canada and the only transcontinental network in North America, the company serves close to 75% of the US population and all major Canadian markets.
CNI carries more than 300 million tons of cargo for exporters, importers, retailers, farmers, and manufacturers.
With a business model focused on cost efficiency and asset utilization, CNI generates highly profitable operations. Net profit margins have approximated 25% or better over the last five years.
Canadian National is loaded with strong operating cash flows, which have totaled nearly $17 billion over the last five years. Over the same period, the company has reinvested nearly $10 billion in capital expenditures to expand their network and build for the future.
While maintaining a prudent financial structure, the company has also returned nearly $10 billion to shareholders through $3.2 billion in dividends and $6.6 billion in share repurchases over the past five years, with 28 million shares authorized for future share repurchases.
CNI has boosted its dividend for 19 straight years at a 17% compounded annual growth rate. In 2015, CNI increased the dividend a whistle-blowing 25% with a dividend payout of 35% of earnings targeted over time.
Over the past five years, revenues have compounded at a 10% annual rate with EPS rolling up a 14% annual growth rate.
CNI delivered solid 2015 first quarter results with revenues steaming ahead 15% to $3.1 billion and EPS (adjusted to exclude a gain on a rail line sale last year) firing up a 30% gain to $.86.
For the full 2015 year, management reaffirmed their outlook for double-digit earnings growth.
Long-term investors should hop aboard Canadian National Railway, a high quality industry leader generating double-digit growth and profitable operations while also rewarding shareholders with growing dividends and share buybacks. Buy.
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