Top Picks 2020: Canadian National Railway (CNI)

01/22/2020 5:00 am EST


Ingrid Hendershot

Founder and President, Hendershot Investments, Inc.

Having celebrated its 100th birthday in 2019, Canadian National Railway (CNI) has become a major transportation and logistics company with a network that reaches from the Pacific to the Atlantic to the Gulf of Mexico, notes Ingrid Hendershot, value expert, money manager and editor of Hendershot Investments.

Operating the largest rail network in Canada and the only transcontinental network in North America, the company serves close to 75% of the U.S. population and all major Canadian markets. CNI carries more than 300 million tons of cargo for exporters, importers, retailers, farmers and manufacturers.

Canadian National Railway leads the North American rail industry in terms of efficiency and operating margins. Scheduled Railroading and Supply Chain Collaboration Agreements with ports, terminal operators and customers helps Canadian National Railway drive efficiencies across the entire supply chain.

With a business model focused on cost efficiency and asset utilization, the firm generates highly profitable operations. Net profit margins have approximated 26% or better over the last five years. Over the same time period, the company has invested nearly $14 billion in capital expenditures to expand their network and build for the future.

Canadian National is committed to long-term shareholder value creation through strong financial performance, dividend payments and share repurchases. The railroad is loaded with strong free cash flows, which have totaled more than $12 billion over the last five years.

The firm has boosted its dividend for 23 straight years with the dividend compounding at a 16% annual growth rate since 1995. In addition, Canadian National Railway has repurchased C$9 billion of its common stock over the last five years.

Long-term investors should hop aboard Canadian National Railway, a high-quality industry leader generating solid growth and profitable operations while also rewarding shareholders with growing dividends and share buybacks.

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