The company’s focus on efficiency and its strong balance sheet helped spur revenue growth of 4.2% in 2019 over the previous fiscal year. While a recent protest blockade hurt volumes in February 2020, the railway has now put that, and a labour dispute late last year, behind it.

The stock trades at an attractive 16.0 times the company’s 2020 earnings forecast.

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CANADIAN NATIONAL RAILWAY CO. (Toronto symbol CNR; www.cn.ca) operates Canada’s largest railway. Its 32,200-kilometre network stretches across the country and reaches the U.S. Midwest and Gulf Coast.

CN has raised its annual dividend rate each year since becoming a public company in 1995. Starting with the March 2020 payment, the company will raise its quarterly dividend by 7.0%. Investors will then receive $0.575 a share instead of $0.5375. The new annual rate of $2.30 yields 2.3%.

The company’s wide geographic reach helps cut its reliance on any single region, which lowers risk for investors. In 2019, 17% of its revenue came from Canadian domestic traffic; 16% from U.S. domestic traffic; 34% from cross-border shipments; and 33% from overseas traffic.

CN also serves a wide variety of customers. Commodities, such as grain, forest products, coal and fertilizers accounted for 68% of its 2019 revenue. They were followed by intermodal (containers that travel by rail, ship and truck), 26%; and automotive equipment, 6%.

Revenue fell 4.8% from $12.6 billion in 2015 to $12.0 billion in 2016, as producers of crude oil and coal cut their shipments due to lower prices for those commodities.

In 2017, revenue rebounded by 8.3%, to $13.0 billion on higher volumes of crude oil, fracking sand, grain and coal. In 2018, revenue jumped 10.0% to $14.3 billion due to growth in shipments of intermodal containers, coal, metals and minerals, oil, chemicals, grain and fertilizers. In 2019, revenues grew 4.2%, to $14.9 billion on higher freight rates.

Investors saw CN’s earnings rise 16.7%, from $3.6 billion in 2015 to $4.2 billion in 2019. Earnings per share gained 30.6%, from $4.44 to $5.80, on fewer shares outstanding.

Blue Chip Stocks: Strong balance sheet should weather the protest storm

A big part of CN’s success comes from its strong focus on efficiency. With the recent strike, CN’s operating ratio worsened slightly, to 61.7% in 2019 from 61.5% in 2018. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.)

In February 2020, CN shut down its operations in Ontario, Quebec and other parts of Eastern Canada after First Nations protestors blockaded its rail lines. It also idled over 400 trains and temporarily laid off 450 workers. The company is optimistic that the resolution of the impasse in late February will hold.

CN’s strong balance sheet will also help it overcome the recent disruptions. As of December 31, 2019, its long-term debt was $11.9 billion. That’s a low 17.4% of its market cap. It also held cash of $64 million.

Your shares now trades at a reasonable 16.0 times the $6.18 a share CN should earn for all of 2020.

Recommendation in The Successful Investor: Canadian National Railway is a buy.