Canadian National Railway raises dividend 3% and launches $2.4bn buyback
Rail operator returns cash to shareholders after delivering 12% EPS growth in fourth quarter
Canadian National Railway has approved a 3 percent dividend increase and authorized a new share repurchase program worth up to C$2.4 billion, as the rail operator seeks to reward shareholders following a strong end to 2025.
The Montreal-based company's board increased the quarterly dividend to C$0.9150 per common share, payable on March 31 to shareholders of record as of March 10, according to regulatory filings. The move represents the latest step in CN's long history of returning capital to investors, with the company now paying an annualized dividend of C$3.66 per share.
Separately, CN authorized the repurchase of up to 24 million common shares, equivalent to 3.9 percent of its outstanding shares as of January 22. The buyback program, known as a normal course issuer bid, will run for 12 months beginning February 4 through February 3, 2027, giving the company flexibility to retire shares when market conditions are favorable.
The capital allocation decisions come on the heels of solid fourth-quarter results, with diluted earnings per share growing 12 percent year-over-year, or 14 percent on an adjusted basis. Revenue rose 2 percent to C$4.46 billion, while CN's operating ratio—a key efficiency metric in the rail industry—improved to 61.2 percent, or 60.1 percent after adjustments.
"The new normal course issuer bid and dividend increase reflect CN's robust cash flow and disciplined capital management," the company said in the announcement. CN's board emphasized that the moves demonstrate a "commitment to returning capital to shareholders while maintaining a strong balance sheet."
Shares of Canadian National Railway, which trade on the New York Stock Exchange under the ticker CNI, rose 2.5 percent to $101.03 on Thursday. The stock remains below its 52-week high of $106.64 but has climbed above its 50-day moving average of $97.58 in recent weeks.
The rail operator's dividend increase and buyback authorization arrive as analysts maintain a broadly positive outlook on the company. CN holds a "Moderate Buy" consensus rating from analysts, with average price targets suggesting potential upside of 13 percent from current levels, according to MarketBeat data. Out of 30 analysts covering the stock, 16 rate it a buy or strong buy, while 13 recommend hold and one advises sell.
CN's decision to deploy capital toward dividends and share repurchases reflects confidence in the company's ability to generate free cash flow while maintaining competitive service levels across its 31,000-mile rail network. As North America's only transcontinental railway, CN connects three coasts and provides critical freight transportation services including intermodal, automotive parts, and forest products.
The company's forward price-to-earnings ratio of 16.95 trades at a slight discount to its trailing multiple of 18.35, suggesting that investors may already be pricing in growth expectations. However, CN's dividend yield of approximately 3.5 percent remains attractive relative to broader market averages, providing steady income for shareholders alongside the potential for capital appreciation.
Looking ahead, investors will be watching CN's operating ratio trends, which management has targeted to improve through operational efficiency initiatives. The company's disciplined capital allocation strategy, balancing dividend growth, share buybacks, and infrastructure investment, has historically positioned CN favorably within the North American rail sector.
The new buyback authorization allows CN to repurchase shares through the Toronto Stock Exchange and New York Stock Exchange at prevailing market prices, subject to regulatory limitations that prevent the company from acquiring more than 25 percent of the average daily trading volume on any given day.