Forever Stocks: 1 Top TSX Dividend-Payer to Buy and Hold

Here’s why names like Canadian National Railway (TSX:CNR)(NYSE:CNI) are among the best forever stocks for TSX investors right now.

| More on:
railroad

Image source: Getty Images

Forever stocks are like the Holy Grail of long-term investing. But just what constitutes a great stock that a Canadian can buy once and forget about? Well, for one thing, no investor should be thinking of “buying once” in the current economic climate.

Even the best and brightest blue-chip names should be bought in lower-risk packets of shares. Now let’s take a look at what makes a stock worth that long position.

Buying forever stocks? Think “quality and variety”

One forever stock stands out more than most others right now: Canadian National Railway (TSX:CNR)(NYSE:CNI). It’s had its ups and downs in the last six months, to be sure. But right now, CN is looking like one of the most defensive dividend-paying stocks on the market.

Why buy? CN Rail is the very picture of diversification. Its rail network is one of the support struts of the Canadian supply chain.

Spanning the whole country, CN Rail is a reduced exposure, long-term play for just about every sector. CN Rail is even a proxy for the oil industry. Want access to the potential growth spurt of an oil rally later in the year?

Want to avoid the top-heavy risk of a pure-play oil producer? Watching the faltering economic moat of the Mainline system with distrust? Try CN Rail and its oil-by-rail initiative.

Build positions gradually on weakness

And how about that dividend? CN Rail may not pay a significantly high yield. Even with the depressed market, CN Rail’s dividend returns haven’t been boosted by any great margin. However, a 2% will add up over the long term — passive income that will build up over the years.

But it’s not as simple as backing up the truck. Instead, investors should make a shopping list of forever stocks as the market continues to waver. Be ready for a few bad quarters and pick names you’d be willing to hold through thick and thin.

Also be prepared for dividends to be reduced or even put on hold while the markets course correct. Decide where you would want to enter the market and buy gradually on increasing weakness.

There’s also a case to be made for trimming weaker names from your long-term stock portfolio. While it’s inadvisable to time the market, rallies are to be made use of.

Last week was a good example of a time to shed a few shares in weaker companies. It also showed just how much upside those beaten-up names could hold. Energy and airline stocks did very well last week, with some historic rallies.

The bottom line

Investors are tiptoeing away from last week’s rally. Indeed, the coronavirus market could be with us for some time. Some countries are looking at programs that will get citizens back to work. However, the bottom line will be a vaccine.

And that won’t be ready for a projected 12-18 months. Investors may want to buy forever stocks and gradually build long-term positions with this kind of time frame in mind.

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 Victoria Hetherington 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.

More on Dividend Stocks

A bull outlined against a field
Dividend Stocks

3 Cheap Stocks I’d Buy Before the Bull Market Arrives

Undervalued TSX stocks such as Savaria and Well Health can help investors generate market-beating gains when markets recover.

Read more »

Increasing yield
Dividend Stocks

5 Canadian Dividend Stocks With Yields of 4% or More

If you want dividends that yield over 4%, you don't have to look far. Here are five large-cap Canadian stocks…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

3 Blue-Chip Dividend Stocks I’d Buy Over and Over

These three dividend stocks are some of the best stocks to buy right now to create strong income not just…

Read more »

calculate and analyze stock
Dividend Stocks

TFSA: Invest $20,000 and Get $867/Year Without Lifting a Finger

Compound passive income by investing tax-free in your TFSA. Check out this mini-portfolio that could turn $20K into $867/year in…

Read more »

retirees and finances
Dividend Stocks

How to Create a Million-Dollar TFSA in Two Decades

Your TFSA could create riches you didn't know were possible, but only if you commit again and again to your…

Read more »

A plant grows from coins.
Dividend Stocks

TFSA Top Stocks: 2 Cheap Dividend-Payers to Buy Before January Ends

TFSA investors can appreciate dividend-paying stocks like Barrick Gold at these modest valuations.

Read more »

analyze data
Dividend Stocks

3 Top Small-Cap Dividend Stocks to Buy in January 2023

Given their high dividend yields and attractive valuations, the following three small-cap stocks would be excellent buys.

Read more »

exchange-traded funds
Dividend Stocks

2 Ways to Score a Richer Monthly TFSA Payout

These two Vanguard ETFs pay high yields and are steady-paying holdings in a TFSA.

Read more »