A Canadian Dividend Stock to Hold Forever in Your TFSA

Here is why Canadian National Railway (TSX:CNR)(NYSE:CNI) is my top forever dividend stock for your TFSA.

| More on:

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Haris Anwar has no position in the companies mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »