Canadian National Railway: On Track for Continued Success?

Here’s why long-term investors may consider Canadian National Railway (TSX:CNR) a stock that’s certainly on track for continued success.

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Canadian National Railway (TSX:CNR) is one of Canada’s largest railway companies. It has a coverage network of 20,000 route miles and offers shipping services across its home country as well as in the United States. Canadian National has its headquarters in Montreal and has been operational since 1919. 

Here are the reasons why this company is on the track for continued success. 

Dividend payments increasing steadily over the last 10 years

As per the company’s recent earnings report, Canadian National has increased its quarterly dividend payment to $0.79. This takes the hike in annual dividend payments over the last 10 years from $0.75 to $3.16, indicating a compound annual growth rate (CAGR) of 15%. That’s impressive.

These consistent and reliable dividend hikes make CNR a valuable income stock for investors. Moreover, the company’s earnings per share have also been appreciating by 2.8% annually. These metrics highlight the company’s potential to provide higher shareholder returns by increasing the proportion of earnings payout. 

Additionally, this dividend will be payable on June 30, 2023. It will be available to shareholders on record as of June 9, 2023. 

CNR beats Zack’s consensus estimate in its Q1 2023 reports

According to data released on April 25, 2023, CNR’s revenue and earnings have exceeded Zack Investment Research’s consensus estimate. The latter had predicted quarterly earnings to reach US$1.26/share, while the company achieved US$1.35/share. This depicts a year-over-year growth of 29.8%. 

Moreover, quarterly revenue has been reported at US$3,189.8 million, surpassing Zack’s estimate of US$3,152.3 million. The driving force behind this was the high fuel surcharge revenues due to an increase in fuel prices. Freight revenue also contributed significantly in this regard, with the company seeing year-over-year growth of 17%. Adjusted operating income also rose by 34.4% year over year, with figures reaching $1,662 million.

Canadian National Railways introduces continental shipping services in North America

As per reports on April 25, 2023, CNR is set to start its new container shipping services in North America. The name of this intermodal service is Falcon Premium and is a tie-up between CNR, GMXT and Union Pacific Railroad. It will extend the Canadian railway operator’s tracks from Vancouver to Halifax, Chicago, and the northern part of Mexico City. 

The execution of this deal was to counter the recent merger of CP Rail with Kansas City Southern. It also aims to gain clients from south of the border via the trucking companies who have customers in sectors related to temperature-controlled products, food, auto parts and appliances.

Bottom line

Strong financials and superb expansion plans have set CNR on the road to achieve long-term growth. Thus, it can be justly said that this company is on track for continued success.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

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