Canadian Pacific Railway profits rise to $540M as company chugs past weak economy in first quarter

Canadian Pacific Railway Ltd. chugged past a weak economy in the first quarter, reporting an increase in profits and raising its dividend by more than 40 per cent.

The railway said Wednesday it will now pay a quarterly dividend of 50 cents per share, up from 35 cents.

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For its first quarter, the company said it earned $540 million or $3.51 per diluted share, up from a profit of $320 million or $1.92 per diluted share a year ago.

On an adjusted basis, the railway reported a profit of $384 million or $2.50 per diluted share for the quarter, up from an adjusted profit of $375 million or $2.26 per diluted share a year ago.

Revenue slipped to $1.59 billion compared with $1.67 billion in the first three months of 2015.

CP also reported that its operating ratio, which tracks operating expenses as a percentage of revenue, improved to 58.9 compared with 63.2 per cent a year ago.

"The precision railroading model works in all economic environments," CP chief executive Hunter Harrison said in a statement.

"Despite weakness in the economy and volume headwinds, we focused on what we can control our costs and our commitment to providing reliable service and delivered a record performance."

U.S. merger dropped

Last week, CP gave up its attempt to merge with Norfolk Southern Corp. after the U.S. Justice and Defense departments raised concerns about the proposed takeover.

The Calgary-based railway had proposed the deal in November, which would have created the largest railway in North America.

In addition to the increased dividend, the railway said it may buy back up to 6.91 million of its shares or roughly five per cent of its "public float" of shares under its normal course issuer bid.

By buying back its shares, a company spreads its profits over fewer shares. That increases its earnings per share, a key ratio used to determine a company's financial health.

CP bought back 11,375,189 of its shares at a weighted average price of $198.46 under its previous normal course issuer bid, which expired March 17.