In  1830 the first railroad in the world was built in England to travel from Liverpool to Manchester and the railway was called the Liverpool and Manchester Railway. For investors the railway was a financial success paying an annual dividend of 9.5% for its 15 years of existence and then it was merged into another railway to merge to become the London and Northwest Railway. After the initial outlay of capital, the railway system worked and railways around the world were built and financed. Unless the railway had goods to ship or was less than the competition (in North America faster than ocean going ships) the railway was a large capital business. To overcome the bankers concerns land grants were given by eager governments, although the people and commodities tended to come later for the world was a very different place in the 1800’s. Once the railways came into existence, the movement of commodities – oil, coal, iron, wheat, corn changed forever. In Canada, there are two railways which dominate the landscape the CPR and the CN. The CPR was the first railway to be built what started out as a private enterprise encouraged by the government, needed vast government supports until in started running and then turned pro private again. The CN is a merger of all the other railways that tried to compete against the CPR.

If you think about the era of railway building – hundreds of millions of dollars were raised by characters now termed larger than life. In the case of the CPR or Canadian Pacific Railway – there were 4 men who founded the company – Donald A Smith, George Stephen, James Hill, Richard Angus and Duncan McIntyre. They had been involved with the St. Paul and Manitoba Railway – made money with it and thought why not take the next step?  The lead person was Donald A Smith (the biography is Lord Stathcona – Donald A Smith written by Donna McDonald published by Dundurn Press, Toronto and Oxford,  1996) who at the time had a number of advantages he brought to the organization. For a number of years he was connected with the Hudson Bay Company which the King of England gave to his cousin Rupert all the lands around all the waters that flow into Hudson’s Bay or about half of Canada. Mr. Smith was President of the Bank of Montreal and for a time had a seat in Parliament of Canada. Now days we would think there is little too much conflict of interest, however it was a different time. Mr. Smith was an active trader on the Wall Street and London markets, he was making more money from his holding of bonds that his day job.

Most companies use the assistance of the government, however the government is most willing to help when the companies make profits. When the company needs the money, the government is slow, runs on its own agenda (votes) and more importantly needs other issues to rally around before it helps. The railway was the same, building across the plains from Winnipeg to Calgary or Chicago to Denver is not the expensive aspect, it is in the mountains and in Canada north of the Lake Superior where it is rocky and full of swampy or muskeg conditions. However, as time moved and commodities were discovered in the mountains, the railway became profitable to run for it could set the freight rates, could sell the land or build new enterprises to take advantage of it.

Linking to dividend paying stocks, in much as the technology was changed the world, the iron coach or railways always changed the world. As the technology is introduced besides to wonder is to decide how can earnings be made on a consistent basis. In that sense nothing has changed, but everything changes.

There are more questions than answers, till the next time – to raising questions.