Canadian National Railway (TSE:CNR) Will Pay A Larger Dividend Than Last Year At CA$0.845

Canadian National Railway Company's (TSE:CNR) dividend will be increasing from last year's payment of the same period to CA$0.845 on 28th of March. The payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

View our latest analysis for Canadian National Railway

Canadian National Railway's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Canadian National Railway's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 11.7% over the next year. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Canadian National Railway Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from CA$0.86 total annually to CA$3.38. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Canadian National Railway's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Canadian National Railway has impressed us by growing EPS at 8.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Canadian National Railway Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Canadian National Railway that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.