A Canadian Dividend Stock to Hold Forever in Your TFSA

There aren’t many dividend stocks in Canada that you can buy with an intention to never sell in your Tax-Free Savings Account (TFSA). But Canadian National Railway (TSX: CNR)(NYSE: CNI) stock is one great candidate if you’re building a portfolio consisting of “forever” stocks.  

The reason I’m so confident in recommending CN Rail for your forever stock portfolio is that this transportation giant has a dominant position in the region’s economy. And I don’t think that position is going to change anytime soon.

CN Rail runs a 19,600-mile rail network that spans Canada and mid-America, connecting the Atlantic, the Pacific, and the Gulf of Mexico. This wide economic moat makes CN Rail a stock that has the power to defend its business, while continuing to pursue growth.

Early this year, some investors got nervous and dumped CN Rail stock after the company faced some capacity issues following a surge in demand for freight services. But since then, CN Rail stock rebounded strongly, gaining 30%, benefiting from a strong North American economy and a successful renegotiation of NAFTA trade agreement between the U.S. and Canada.

Aggressive expansion plan

Investors have also welcomed CN Rail’s aggressive expansion plan to overcome its capacity challenge. The company is spending a record $3.5 billion to buy new rail cars, add more workers, and improve the western section — from the British Columbia ports of Prince Rupert and Vancouver to Chicago — where growth is strongest.

This positive growth environment is also reflecting in the company’s bottom line. In the most recent quarter, CN Rail posted a 27% jump in earnings. With the second-quarter financial results, the company also increased its guidance for the year to $5.30-$5.45 per adjusted diluted share, up from its previous guidance of $5.10-$5.25.

With its growth potential, CNR is a great stock to earn growing income. The company has paid uninterrupted dividends since going public in the late 1990s. This year, management boosted the quarterly payout by 10% to $0.46 per share, totaling $1.84 annually.

The company’s ability to continue paying growing dividend is something you must look for when you add a stock in your forever portfolio. CNR has been increasing its dividend with a five-year CAGR of 14% and has plans to continue with the double-digit growth in its payouts.

Bottom line

Trading at $114.32 at the time of writing, CNR stock trades close to the 52-week high after a good run in the past six months. Over the long run, its robust cash flows, dominant market position, and solid history of paying dividends are some of the qualities that make it a solid dividend stock to have in your TFSA.