cp rail

CANADIAN PACIFIC RAILWAY LTD., $202.17, Toronto symbol CP, reported lower freight volumes in the latest quarter, mainly due to falling prices for oil and other commodities, but the railway still reported better-than-expected results. In the three months ended September 30, 2015, CP earned $427 million, up 6.8% from $400 million a year earlier. Per-share profits jumped 16.5%, to $2.69 from $2.31, on fewer shares outstanding. These results exclude unusual items, such as gains on asset sales. On that basis, the latest earnings beat the consensus estimate of $2.67. Revenue gained 2.3%, to $1.71 billion from $1.67 billion, also beating the consensus forecast of $1.69 billion....

ISHARES S&P/TSX 60 INDEX ETF $20.99 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.

The index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include.

The index’s top holdings are Royal Bank, 8.3%; TD Bank, 7.3%; Bank of Nova Scotia, 5.7%; CN Railway, 4.7%; Suncor Energy, 3.9%; Bank of Montreal, 3.8%; Valeant Pharmaceuiticals, 3.8%; Enbridge, 3.7%; BCE, 3.2%; Manulife Financial, 2.9%; TransCanada Corp., 2.9%; CIBC, 2.9%; Canadian Natural Resources, 2.8%; CP Rail, 2.5%; and Potash Corp., 2.5%.

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CANADIAN PACIFIC RAILWAY LTD. $199.75 (Toronto symbol CP; Shares outstanding: 161.0 million; Market cap: $31.3 billion; TSINetwork Rating: Above Average; Dividend yield: 0.7%; www.cpr.ca) prefers to use its excess cash to buy back shares instead of raising its $1.40- a-share dividend, which yields 0.7%. That’s because many of its investors live in the U.S. and are subject to withholding taxes on dividends from Canadian firms.

The company could repurchase up to 9.1 million shares under its latest authorization, and it’s now closing in on that limit, so CP has raised it to 11.9 million shares, or 7% of the 161.0 million outstanding as of June 30, 2015.

The company expects to complete these purchases by March 17, 2016.

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CANADIAN PACIFIC RAILWAY LTD. $199.75 (Toronto symbol CP; Shares outstanding: 161.0 million; Market cap: $31.3 billion; TSINetwork Rating: Above Average; Dividend yield: 0.7%; www.cpr.ca) prefers to use its excess cash to buy back shares instead of raising its $1.40- a-share dividend, which yields 0.7%. That’s because many of its investors live in the U.S. and are subject to withholding taxes on dividends from Canadian firms. The company could repurchase up to 9.1 million shares under its latest authorization, and it’s now closing in on that limit, so CP has raised it to 11.9 million shares, or 7% of the 161.0 million outstanding as of June 30, 2015. The company expects to complete these purchases by March 17, 2016....

Though it has slowed with the economy, we still rate CP Rail as a true blue chip stock. We like its ability to unlock hidden value.

ENBRIDGE INC., $51.21, Toronto symbol ENB, has received regulatory approval to reverse the flow of crude oil on its Line 9 pipeline between Sarnia, Ontario, and Montreal. Under the plan, oil will now flow from Sarnia to Montreal. Enbridge will also increase the line’s capacity so it can handle heavy crude from Alberta’s oil sands. It took longer than expected for regulators to sign off, so the project’s cost jumped to $800 million from the company’s original estimate of $100 million. To put that in context, Enbridge earned $505 million, or $0.60 a share, in the three months ended June 30, 2015. The company still needs to finish some technical preparations, so it didn’t say when crude would start flowing through the line....

CANADIAN PACIFIC RAILWAY LTD. $190 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 161.3 million; Market cap: $30.6 billion; Price-to-sales ratio: 4.5; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight over a 22,000-kilometre rail network between Montreal and Vancouver, as well as hubs in the U.S....

We recommended Canadian Pacific Ltd. in our very first issue in January 1995. At that time, CP held a variety of businesses beyond railways, such as hotels, coal, and oil and gas. We saw these as undervalued assets. In 2001, CP unlocked some of this hidden value by spinning off these businesses as separate firms. As a stand-alone railway, we still felt CP had plenty of room to improve. A prominent American hedge firm shared our opinion, and in 2012, it installed former CN Rail chief executive Hunter Harrison as CP’s new CEO. Thanks to a major costcutting plan, CP hit a record high of $248 in October 2014. The stock has moved down lately on slowing volumes of grain, oil, coal and other commodities. However, CP’s improving efficiency sets it up for more gains as the economy rebounds....

PENGROWTH ENERGY CORP., $1.58, Toronto symbol PGF, continues to cut costs as low oil and natural gas prices hurt its earnings and cash flow. This week, the company said it would pay its final monthly dividend of $0.02 a share on September 15, 2015. It will then shift to a quarterly payout of $0.01 a share starting in December 2015. The new annual rate of $0.04 a share, down 83.3% from $0.24, yields 2.5%. Pengrowth will also suspend its dividend reinvestment plan with the December 2015 payment. Participants will then receive their dividends in cash until the company reinstates the plan....

CANADIAN PACIFIC RAILWAY LTD. $208.83 (Toronto symbol CP; Shares outstanding: 161.0 million; Market cap: $34.0 billion; TSINetwork Rating: Above Average; Dividend yield: 0.7%; www.cpr.ca) transports freight over a 22,000-kilometre rail network between Montreal and Vancouver, as well as hubs in the U.S. Midwest and Northeast.

CP continues to benefit from lower fuel prices and an aggressive cost-cutting plan, but the slowing economy is hurting its freight volumes and revenue. That has caused the shares to fall about 14% from earlier this year.

In the three months ended June 30, 2015, the railway earned $404 million, up 8.9% from $371 million a year earlier. Per-share profits jumped 16.1%, to $2.45 from $2.11, on fewer shares outstanding.

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