Canadian National Leads Advancing Industry Group
Railroads have been moving in the right direction in IBD's ranking of 197 industries, and the top-rated rail stock --Canadian National Railway ( CNI ) -- is worth considering if you're looking for both a dividend and growth potential.
The Transportation-Rail group ranked No. 43 as of Tuesday's IBD, up from No. 74 about three weeks ago and No. 140 about seven months ago. IBD ranks its 197 industry groups based on six-month price performance ; the leaders are generally the top 20 to 40 groups.
Canadian National has the top IBD Composite Rating within its industry group, earning a grade of 94 out of a best-possible 99. It's actually tied at the top withGenesee & Wyoming ( GWR ), but that stock doesn't offer a dividend.
S&P analysts also view Canadian National as the top dog, at least in the area of efficiency.
"We consider CNI to be the most efficiently run of the major North American railroads by a variety of metrics -- a position it maintains by constantly seeking new ways to boost asset productivity," the analysts wrote in a recent note.
Canadian National offers a dividend with an annualized yield of about 1.6%. It sports a strong EPS Stability Factor of 3, near the steadiest-possible grade of 0. That steadiness suggests the company should be able to keep paying its dividend.
However, Canadian National missed Wall Street's expectations with its third-quarter profit growth of 17%, although that represented an acceleration from Q2's 13% increase.
The Montreal-based company also gave a cautious outlook for Q4 as it posted Q3 results in October. Plus, Credit Suisse analysts noted that management "refrained from providing any color" for 2013.
Canadian National's stock chart shows a shallow cuplike pattern taking shape since mid-September. The stock is forming that pattern's right side and stands only about 3% off its Sept. 14 high.
In 2012, the stock generally has been making a slow and steady climb, staying in the vicinity of its 10-week moving average.
The number of U.S. mutual and hedge funds with a stake has risen for two quarters in a row, according to IBD data.