My personal favourite dividend growth stock has been losing steam.
Guess I'll have to look at buying some more of Canadian National Railway, which I have owned in my registered retirement savings plan for close to 10 years. CNR's down about 4 per cent for the 12 months through early April, which is an almost meaningless setback for a stock that has averaged gains of 11.7 per cent per year over the past decade. Still, opportunities to buy CNR at reduced prices don't come around often.
CNR's dividend record impresses me more than its share price gains, though. A chart on the stock information page of the company's website shows annual split-adjusted dividend increases since 2000. Globeinvestor shows that the company's dividends have risen by an annualized 18 per cent over the past five years and 20 per cent in the past 12 months.
As the biggest name in the S&P/TSX industrials index, you might expect CNR to act like a cyclical stock that takes its cue from the economy. To some extent, that's true. But CNR has shown the ability to survive tough times without penalizing shareholders.
In my 2009 book Rob Carrick's Guide to What's Good, Bad and Downright Awful in Canadian Investments Today, I included CNR on a list of "dividend bulldogs" that maintained dividend growth through the global financial crisis. Last week, an RBC Dominion Securities technical research note suggested investors shift to a more defensive stance and included CNR on a list of stock picks. CNR's the kind of stock that ends up as a top pick on all kinds of lists. In a recent Number Cruncher, it appeared on a list of the best wealth creators in the S&P/TSX composite index.
CNR's a dividend growth star, but its current yield of 1.9 per cent is comparatively modest. Here we have another sign this stock is worth considering right now. Since 2011, the average yield has ranged from 1.26 to 1.66 per cent. A rising yield suggests a stock is losing favour with investors, but that's not the case with me and CNR.