Is CP Rail Stock a Buy?

Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP) released its year-end results last week, which showed some good stability even amid the pandemic. For the full year, its revenue of $7.71 billion was down just slightly from the $7.79 billion it reported in the previous year.

Diluted per-share earnings of $17.97, however, were 3% better than 2019’s total.

Over the past 12 months, shares of the railway operator have increased by 23%, outperforming the struggling TSX which has fallen 1% over that same time frame. However, with the stock now trading at around 24 times its earnings, it’s getting a little pricey for a business that may not generate a whole of growth.

In 2019, which was a strong year for the economy, CP’s sales rose by 6.5%. That was down from the previous year when revenue grew by 11.6%. But the company is optimistic, noting that revenue ton mile rose in Q4 and volumes were up in the second half of the year. CP expects to see that volume growth continue in 2021.

The stock does pay a dividend but with a yield of 0.9%, it’s a bit on the light side and investors can earn more from investing in other stocks. By comparison, Canadian National Railway Company (TSX:CNR)(NYSE:CNI), pays dividend that yields 1.9% although it trades at a slightly higher price-to-earnings multiple of 26.

If your priority is stability, then CP Rail could be a solid investment to hang on to. However, if you’re after some good dividend income, then you may want to look elsewhere.