One of the leading Canadian railroad companies,
Canadian Pacific Railway Limited
) announced the repurchase and cancellation of 456,791 of its
common shares under a private agreement with a third-party seller.
The company expects repurchase value for these common shares to be
at a discount to the prevailing market price on the Toronto Stock
Exchange at the time of purchase.
The repurchase will be a part of the previously announced
buyback program for 5,270,374 shares as announced on Mar 11,
Apart from share repurchases, Canadian Pacific also seeks to
reward its shareholders through increased dividend payments. Over
the last couple of years, the company has increased its annual
dividend by an average of 10%. Currently, the company pays a
dividend of 35 Canadian cents per share, which represented a hike
of 16.7% in 2012 from 30 Canadian cents in 2011. We believe the
increased shareholder returns reflect the company's confidence in
delivering strong earnings as economic growth accelerates.
We remain encouraged by Canadian Pacific's healthy performance
backed by volume addition, safety and efficiency along with
favourable cost metrics. Additionally, pricing above inflationary
levels (3-4% year-over-year growth) is expected to aid the
company's projected revenue growth of 6% to 7% in 2014. In
addition, Canadian Pacific remains committed to generating an
operating ratio in the low 70s. The company also targets an
operating ratio of 65% in 2014, way ahead of its initial target of
2016, compelling a competitive advantage against peers like
Canadian National Railway Company
Union Pacific Corporation
Kansas City Southern
Further, Canadian Pacific is strengthening its balance sheet by
improving near-term liquidity with debt offering and pension
prepayments. Last year, the company registered a 15% return on
portfolio based on pension assets. As a result, it expects a
pension income of C$52 million in 2014 versus an expense of C$45
million in 2013, which remains accretive to its cash flows. In
addition, the company also projects an income of C$50 million in
2015 based on portfolios for pension assets.
Currently, Canadian Pacific has a Zacks Rank #3 (Hold).
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