Updated 3/6/25
Canadian National Railway (CNI) has been a staple in North American transportation for over a century. Stretching from the Atlantic to the Pacific and reaching deep into the U.S. market, CNI plays a crucial role in moving raw materials, consumer goods, and industrial products across the continent. As one of the largest and most efficient rail operators, it benefits from strong pricing power and an economic moat that keeps competition at bay.
For dividend investors, CNI has long been seen as a reliable choice. It offers steady cash flow, consistent dividend growth, and financial stability, all of which make it a solid option for those looking for passive income. But is the stock still a good dividend investment today? Let’s break it down.
Key Dividend Metrics
💰 Dividend Yield: 2.42% (Forward)
📈 5-Year Average Yield: 1.84%
💵 Annual Dividend: $2.47 per share
🔄 Dividend Growth: 5-Year CAGR ~9%
🛡️ Payout Ratio: 48.22% (Moderate)
📅 Next Dividend Date: March 31, 2025
❌ Ex-Dividend Date: March 10, 2025
Dividend Overview
CNI has built a strong reputation for paying dividends consistently. Right now, its forward yield of 2.42% is higher than its five-year average of 1.84%, which suggests that the stock price may be trading at a more attractive level than in recent years. This is often a good sign for long-term dividend investors who like to buy when yields are elevated.
A payout ratio of 48.22% strikes a good balance between rewarding shareholders and keeping enough cash on hand for business operations. Since railroads require massive capital investments, it’s reassuring to see that CNI isn’t overextending itself by paying out too much in dividends.
Dividend Growth and Safety
CNI’s dividend track record is hard to ignore. Over the past five years, dividends have increased at an average annual rate of around 9%. For a company in a slow-growing industry, that’s impressive. This kind of steady growth is exactly what income investors look for—strong but sustainable increases year after year.
The company also generates plenty of cash to support its dividend. With $6.7 billion in operating cash flow and $2.58 billion in free cash flow, it has more than enough cushion to keep payments going, even during economic downturns. This financial flexibility is a big reason why CNI’s dividend is considered safe.
Chart Analysis
Trend and Moving Averages
The chart for Canadian National Railway (CNI) shows a clear downtrend over the past year, with the stock consistently making lower highs and lower lows. The 50-day moving average (orange line) has been sloping downward for several months, staying below the 200-day moving average (blue line). This confirms that the stock remains in a bearish phase.
There was a brief attempt at a rebound toward the end of last year, but each rally was met with selling pressure, preventing a sustained move higher. The most recent price action shows the stock hovering near the $100 level, attempting to stabilize.
Volume and Market Participation
Volume has been relatively steady, with occasional spikes in selling pressure, particularly in mid-summer and again in late fall. These surges in volume often indicate moments when institutional investors or large traders were offloading shares.
More recently, volume has remained moderate, with no major spikes to suggest a shift in sentiment. This suggests that while there has been some buying near recent lows, it hasn’t been strong enough to create a clear reversal.
Relative Strength Index (RSI)
The RSI at the bottom of the chart shows that the stock has been hovering in the lower range for an extended period. While it hasn’t completely collapsed into extreme oversold territory, it has remained relatively weak, signaling that momentum is still bearish.
There has been a slight uptick in RSI recently, which could indicate that the selling pressure is easing. However, without stronger price action, it’s not yet a signal that the stock is turning the corner.
Recent Price Action
The last five candlesticks show some mixed signals. There was a sharp dip below $100, followed by a quick recovery, closing above this level. This kind of price action suggests that buyers are stepping in at lower levels, but they haven’t been aggressive enough to push the stock significantly higher.
Wick formations on these recent candles also reveal some indecision. A couple of days showed longer lower wicks, which typically suggest buying interest on dips. However, upper wicks on other days indicate that rallies are being met with selling. Until one side gains control, the stock is likely to continue trading in a range.
Analyst Ratings
Recent Upgrades
📈 Stifel Upgrade (January 16, 2025)
Stifel recently upgraded Canadian National Railway (CNI) from Hold to Buy, raising optimism about its valuation. The firm revised its price target to $120 from the previous $132, noting that while CNI’s performance in 2024 was underwhelming, there’s potential for modest volume and pricing improvements in 2025. The analyst emphasized that the stock’s current levels offer an attractive entry point for long-term investors.
✅ National Bank Financial Reaffirms Strong Buy (January 30, 2025)
National Bank Financial continues to back CNI with a Strong Buy rating, reinforcing confidence in the company’s ability to maintain profitability and navigate industry challenges. The firm believes that recent efficiency improvements and operational cost management could support stronger earnings growth in the coming quarters.
Recent Downgrades
⚠️ Loop Capital Downgrade (February 3, 2025)
Loop Capital took a more cautious stance, downgrading CNI from Hold to Sell. The analyst cited rising earnings pressure and network performance challenges, particularly following the labor lockout of conductors and engineers in August. These disruptions have impacted operational efficiency and freight volumes, leading to a more reserved outlook on near-term growth.
📉 Barclays Price Target Cut (January 17, 2025)
Barclays maintained its Equal Weight rating but lowered its price target from $121 to $112. The firm pointed to sector-wide slowdowns in transportation demand and higher fuel costs, which could weigh on profitability. While not outright bearish, this revision reflects a more neutral stance on the stock’s immediate potential.
Consensus Price Target
📊 Current Analyst Consensus: Moderate Buy
💰 Average 12-Month Price Target: $124.19
📍 Current Stock Price: $101.38
🚀 Upside Potential: +22.50%
📉 Price Target Range: $112 – $171
Analysts remain divided on CNI, with some seeing an attractive entry point while others worry about near-term industry pressures. Investors should weigh both perspectives while considering the company’s long-term growth potential and operational resilience in a shifting economic environment.
Earnings Report Summary
Canadian National Railway (CNI) just released its latest earnings report, and it was a bit of a mixed bag. While the company continues to navigate a challenging economic environment, there were both positives and some areas that raised concerns.
Fourth Quarter Performance
In the last quarter of 2024, CNI reported earnings per share (EPS) of $1.30, which came in slightly below what analysts had expected. The company faced some headwinds, including labor disruptions and weather-related challenges, which weighed on performance. While revenue held up fairly well, operational efficiency took a bit of a hit, impacting overall profitability.
Full-Year Financials
For the full year, revenue landed at around CA$17.0 billion, a modest 1.3% increase from the previous year. However, net income saw a noticeable drop, down 21% to CA$4.45 billion. This decline pushed the company’s profit margin lower, falling from 33% to 26%. The primary reason for this dip was rising costs and temporary disruptions that affected network efficiency.
Operational Challenges
It wasn’t the smoothest year for CNI, as labor strikes and Alberta wildfires created logistical headaches. These disruptions led to lower freight volumes and squeezed earnings in key quarters. Management acknowledged that these challenges played a significant role in the company’s weaker-than-expected results. However, they also highlighted efforts to improve network resilience going forward, aiming to mitigate similar issues in the future.
Even with these hurdles, CNI isn’t backing down when it comes to rewarding investors. The board approved a 5% increase in the quarterly dividend for 2025, marking the 29th consecutive year of dividend growth. On top of that, the company plans to repurchase up to 20 million common shares over the next 12 months. Moves like these signal confidence in the company’s long-term financial health, even as near-term challenges persist.
Looking Ahead
For 2025, CNI adjusted its profit expectations, now anticipating low single-digit earnings growth, rather than the previously expected mid-to-high single-digit range. This outlook reflects continued caution about broader economic conditions, especially with North American industrial production projected to grow only about 1% next year. That said, the company remains focused on optimizing its operations and investing in areas that will drive long-term stability and growth.
While 2024 wasn’t without its setbacks, CNI is pushing forward, balancing short-term pressures with a long-term focus on profitability and efficiency.
Financial Health and Stability
Strengths
- High profitability: CNI boasts a strong profit margin of 26.09% and an operating margin close to 40%. These numbers indicate that the company runs efficiently, even with the high costs associated with railroads.
- Strong return on equity (ROE): A 21.61% ROE shows that CNI is making good use of shareholder capital.
Concerns
- High debt: The company carries $21.37 billion in total debt, with a debt-to-equity ratio of 101.52%. That’s quite a bit of leverage, which is common in the industry but still something to watch.
- Low cash reserves: With just $389 million in cash on hand, CNI relies heavily on its ongoing cash flow to fund operations and dividends. This isn’t necessarily a red flag, but it means there’s little room for unexpected financial shocks.
Valuation and Stock Performance
From a valuation perspective, CNI is trading at a price-to-earnings (P/E) ratio of 20.85 on a trailing basis and 18.48 on a forward basis. These numbers suggest the stock is reasonably priced compared to its historical levels. The price-to-sales ratio of 5.44 and price-to-book ratio of 4.36 indicate that while the stock isn’t dirt cheap, it isn’t excessively expensive either.
Looking at stock performance, CNI has had a rough stretch recently. It’s down over 20% from its 52-week high of $134.02 and is currently hovering near its 52-week low of $96.28. The 50-day moving average is sitting at $102.31, while the 200-day moving average is higher at $112.14. This suggests the stock is still in a downtrend, which could present a buying opportunity for long-term investors looking to lock in a higher yield.
Risks and Considerations
- Economic sensitivity: Railways depend on a strong economy. If trade volumes shrink or industrial production slows down, revenues could take a hit.
- Regulatory pressure: The industry is heavily regulated, and new policies on emissions, pricing, or labor laws could impact future profitability.
- Competition: While CNI dominates in its space, it still faces competition from trucking, pipelines, and other railway operators. Maintaining pricing power is key.
- Debt levels: With a significant amount of debt on the books, any increase in interest rates could lead to higher borrowing costs and pressure on cash flow.
Final Thoughts
Canadian National Railway has long been a solid choice for dividend investors, and that hasn’t changed. The company offers a strong yield, consistent dividend growth, and a history of financial stability. Its current valuation suggests it may be trading at an attractive price relative to historical levels, and its dividend is well-supported by cash flow.
While the stock faces headwinds from economic conditions and high debt levels, its dominant market position and efficiency help offset these risks. For those looking to add a reliable dividend payer to their portfolio, CNI remains a strong candidate, especially at its current price.
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