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The railway will now pay a quarterly dividend of 31.25 cents per share, up from its previous rate of 25 cents per share.

Canadian National Railway Co. boosted its dividend by 25 per cent as fourth-quarter profit rose by almost a third.

Canada's biggest railroad is benefiting from record full– year freight volumes with surging shipments in energy-related commodities and materials to feed the U.S. housing construction boom. The gains will boost adjusted income this year by at least 10 per cent, the company said today.

"CN's story has been steady, consistent, predictable earnings and dividend growth," Robert Mark, an analyst at MacDougall, MacDougall & MacTier Inc. in Toronto, said in a telephone interview before Tuesday's results. "We've been pretty spoiled with CN over the last few years."

The wealth management firm owns Canadian National shares as part of the C$5-billion ($4-billion) in assets it oversees.

Canadian National, based in Montreal, said it will boost its quarterly dividend to 31.25 cents a share from 25 cents. The railroad had been expected to set its dividend at 30 cents a share, according to the average Bloomberg projection.

A year ago, the company increased the payout by 16 per cent.

Canadian National reported fourth-quarter earnings that beat analysts' estimate. Profit rose 33 per cent to C$844-million, or C$1.03 a share. That topped the 97 cent-average forecast. Revenue jumped 17 per cent to C$3.21-billion, exceeding the C$3.1-billion average forecast.

The company's operating ratio – a widely watched measure of railroad efficiency that compares expenses to sales – improved by 4.1 percentage points in the fourth quarter to 60.7 per cent. For all of 2014, the ratio improved by 1.5 points to 61.9 per cent.

Momentum Building Chief Executive Officer Claude Mongeau said his agenda was working.

"This momentum is helping us to grow CN's business faster than the overall economy and to do so at low incremental cost. This will provide us with a strong foundation for 2015," he said.

This year, Canadian National plans to increase its capital spending by about C$300-million for a total of C$2.6-billion, it said today. That includes about C$1.3-billion for track infrastructure and network maintenance, and about C$500-million for equipment, including 90 new locomotives, Chief Financial Officer Luc Jobin said.

Energy-related carloads such as crude oil and frac sand will probably climb about 35 per cent from last year's 217,000, Chief Marketing Officer Jean-Jacques Ruest said on a conference call with analysts.

The shares gained 32 per cent last year, and are up 6.7 per cent so far this year to C$85.17.

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