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How Have Canadian Pacific Railway’s Returns Been So Far in 2018?

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Canadian Pacific’s 2018 outlook

Canadian Pacific Railway (CP) has been the only Class I railroad (XTN) company to be highly optimistic about 2018. On the company’s 4Q17 earnings call, its CEO, Keith E. Creel, said, “On the guidance front, we’ve built up momentum through 2017. So looking forward, we’re carrying that momentum into 2018, and this company, again, is poised for another record-setting year. 2018, we’re targeting mid-single-digit revenue growth and EPS growth in the low double digits.”

Creel further stated, “I can tell you this, in 25 years of railroading, I’ve never been more confident in a team’s ability to deliver for our shareholders, for our customers and our fellow employees as we write the next chapters of the remarkable CP story.”

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Stock price performance

Canadian Pacific Railway stock’s 52-week high is $188.80 per share on the NYSE. On March 7, 2018, the company’s closing stock price was $175.68, indicating that CP is trading near this high. In the last 12 months, CP has returned 17.8% to stock owners.

On the other hand, rival Canadian National Railway (CNI) has returned a mere 1.4%. Note that CNI was crippled with service issues during the harsh winter season. Also, according to a March 5, 2018, press release, CEO Luc Jobin has left the company. 

Let’s compare the returns generated by major railroad (XTN) companies in the last year:

  • Norfolk Southern (NSC) rose 15%.
  • CSX (CSX) rose 13.7%.
  • Union Pacific (UNP) rose 20.3%.
  • Kansas City Southern (KSU) rose 18.8%.
  • Genesee & Wyoming (GWR) fell 3.5%.

Summary

Canadian Pacific Railway has witnessed a steady fall in its dividend payout over the last several quarters. This suggests a heavy amount of reinvestment in the business. 

Given the advantages flowing from the Tax Cuts and Jobs Act, CP is poised to see a huge jump in its free cash flows. As a result, the company could consider a higher growth rate of its dividend per share in the quarters to come. Though CP’s dividend yield may not look attractive, investors can expect reasonable capital appreciation in the near future.

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