The eight-day Canadian National Railway (TSX:CNR)(NYSE:CNI) strike may not be over yet for Canadian retirees. Canadian retirees should understand how the national rail strike impacts their income from retirement portfolio investments.
The tentative agreement between the union and the railway may not last if Teamsters members do not ratify the terms in a union vote.
Already, the union strike where 3,200 conductors and yard operators at Canadian National Railway refused to work may require weeks to catch up on shipments. Shipments of grain, oil, propane, and metal could not reach their intended destinations last week, causing national shortages.
What’s worse is that another strike may be on the horizon if the Teamsters members vote “nay” to the terms of the agreement.
Logistics network rule over prices
Changes in prices do not only affect your shopping receipts. Your income-generating assets are also heavily influenced by prices on propane, grain, and metal. Even more important, without a functioning logistics network, the stocks in your portfolio cannot deliver goods to customers, reducing revenue.
Reduced revenue means two things. First, the stocks in your portfolio are likely to dip in price temporarily. Second, if you have any spare cash to invest, now is the time to do it — while prices are lower.
Experienced Canadian savers know that the best time to save is when the prices are low and returns are high; the lower cost to buy translates into higher potential profits to add to your monthly retirement income. Thus, retirees should never be scared away by a down market; but, instead, excited to buy (at a discount) dependable dividend stocks with stable price histories.
CN Railway investors should support the union
Underscoring the importance of the union is a recently released recording of the Canadian National Railway pressuring an exhausted employee to move a train, which would endanger himself and the public. The decision to record the call required foresight on the part of the train operator, indicating that the company might frequently disregard necessary safety protocols to avoid accidents.
Fatal train accidents are all too common, and they tend to rock the stock market as well. That means shareholders in CN Railway should care about the number of safety incidents reported at the railway if not for the lives at stake, then for the sake of shareholder value, at least.
Safety issues like the one depicted in the recording can be costly for shareholders. CN Railway stock only pays out a dividend of $0.5375 per share, amounting to a yield of 1.76% at the current stock price of $121.93. A reduction in income from expensive lawsuits or remuneration could quickly turn CN Railway from a stock to buy to stock to sell.
The railway stocks are popular because, as an oligopolistic market in Canada, the railroads have a lot of market power. The railroads can afford to set market prices above marginal cost. Canadian National Railway, for instance, reports an operating margin of 40.76% and a profit margin of 29.63%, according to Yahoo Finance.
The drawback to an oligopoly, however, is the disparate power the employer has over workers. The business can quickly become cutthroat with ineffective management and complacent safety standards. Hence, the crucial role unions play in protecting not only employee interests but also shareholder concerns about minimizing unnecessary legal problems.
Canadian retirees need to pay attention to news impacting the Canadian logistics system. Railways, shipyards, and trucking undoubtedly affect more than just your grocery bill. Delayed shipments and union negotiations also influence your level of comfort during retirement.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
Fool contributor Debra Ray has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. The Motley Fool recommends Canadian National Railway.