The railway contact wire, which supplies electric railways with electric power, plays an important role in determining the maximum railway velocity. In general, the maximum allowable velocity of an electric railway is less than seventy percent of the wave propagation velocity of the contact wire. Because the contact wire is more a beam model with dispersive wave characteristics than a string model, the wave propagation velocity depends on the frequency. For this reason, there have been only few studies on the wave propagation of the contact wire. In this paper, we proposed two useful methods for estimating the wave propagation velocity of the railway contact wire by using the Gabor wavelet transform on the experimental signals. In the first method, the ridges of wavelet transform, which contain the essential information about dispersive characteristics, are used. Specifically, the wave propagation velocity of the contact wire can be extracted from the time difference of the wavelet ridges of the measured signals. In the second method, the cross-correlation analysis of each wavelet transform is used to extract the wave propagation. The selection of the optimal Gabor shaping factor for the best time-frequency localization by using the Shannon entropy cost function is also discussed.