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Canadian National (CNI) Stock Up 5.3% in the First Nine Months

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With a gradual recovery from the coronavirus pandemic, shares of Canadian National Railway Company CNI have outperformed the industry in the first nine months of 2021. The stock has gained 5.3% compared with the industry’s 1.5% rise.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Factors Driving Growth

Canadian National’s performance with respect to grain movement is impressive. Notably, the company moved more than 31 million metric tonnes (MMT) of Canadian grain via carloads during the 2020-2021 crop year. Owing to this superlative movement, the company bettered its previous record set in the crop year of 2019-20 when it moved 29.4 MMT via carload. We expect the company to continue performing well with respect to grain transportation in crop year 2021-2022.

The railroad operator’s cost-control measures are appreciative. Owing to low fuel prices, reduced labor costs as well as decreased purchased services and material expenses, operating expenses fell 7% year over year in the first half of 2021, despite a rise in fuel costs.

Canadian National’s ability to generate free cash flow supports its shareholder-friendly activities. In first-half 2021, the company generated free cash flow to the tune of C$1.28 billion. The company estimates free cash flow of C$3-C$3.3 billion for the current year compared with C$3.2 billion in 2020. Investors are also impressed by the company's efforts to reward its shareholders. To this end, the company's board approved a 7% increase in its quarterly dividend to C$0.615 in January 2021. In fact, the current increase marks the 25th consecutive year, wherein the company resorted to a dividend hike. Despite the ongoing turbulence, its decision to hike its dividend payment is encouraging.

Apart from Canadian National, railroad operators like Union Pacific Corporation UNP, CSX Corporation CSX and Norfolk Southern (NSC) increased their respective dividend payouts this year. Union Pacific’s board announced a 10% hike (in May) in its quarterly dividend to $1.07 per share (annualized: $4.28). CSX hiked its quarterly dividend by 8% (in February) to 28 cents (annualized: $1.12) per share. Norfolk Southern announced a 10% increase (in August) in its quarterly dividend to $1.09 per share (or $4.36 annually).


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