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Solid Grain Movement Aids Canadian Pacific (CP), High Debt Ails

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We recently issued an updated report on Canadian Pacific Railway Limited (CP - Free Report) .

We are impressed by the company's efforts to reward its shareholders. To this end, the company hiked its dividend payout by 15% to C$0.95 per share (C$3.8 annually) in July, mainly owing to increased efficiencies, courtesy of the precision scheduled railroading model.

Canadian Pacific is performing brilliantly with respect to grain movement. To this end, the company set a record with respect to movement of Canadian grain and grain products in 2020. Last year, the railroad operator moved 31.32 million metric tonnes (MMT) of Canadian grain and grain products, more than any previous calendar year.

Meanwhile, we are concerned about Canadian Pacific’s high-debt levels. The company had cash and cash equivalents of C$147 million, way below its debt (maturing within one year) of C$1,186 million at the end of fourth quarter. This implies that the company does not have sufficient cash to meet its current debt obligations.

Zacks Rank & Stocks to Consider

Canadian Pacific currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Transportation sector are Kansas City Southern (KSU - Free Report) , FedEx Corporation (FDX - Free Report) and Herc Holdings Inc. (HRI - Free Report) . Kansas City and FedEx carries a Zacks Rank #2 (Buy), while Herc Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Kansas City, FedEx and Herc Holdings is pegged at 15%, 12% and 31.2%, respectively.

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