Q: Can you compare the dividend growth at CN and CP over time? It looks to me that CP hasn’t increased the dividend since Oct. 2020. The longest previous period with no increase in the recent past seems to be July 2012 to July 2016. In contrast, CN seems to increase their dividend every year. But has the rate of increase for both been similar over the long run despite the choppiness at CP? Also, the rate of increase seems to be slowing more recently at CN, it was often double digit increases prior to 2020. Any insights appreciated, thanks.
5i Research Answer:
Dividend growth over different time frames:
CNR: 5-year growth 11.7%, 10-year growth 13.9%, 3-year growth 11.1%.
CP: 5-year growth 8.6%, 10-year growth 10.5%, 3-year growth around 2.2%.
It is correct that CP’s dividend growth has been lower compared to CNR, especially in recent years as CP allocated a meaningful a mount of capital in its most recent acquisition of Kansas City Southern. In addition, CP historically preferred to return capital to shareholders through buyback more than dividend growth. CNR’s dividend growth in recent years was also slower compared to pre-pandemic level mainly because of the shift to buybacks rather than dividends.