There has been a lot going on with the TSX today. In fact, it’s been in a very dramatic place in September, and it looks like that will only continue heading into October. But while there has been a lot of drama, there is one stock that still isn’t feeling the love it should despite a major win for the company last month — a win that led to me to buy even more of this top stock.
That stock is Canadian Pacific Railway (TSX:CP)(NYSE:CP).
CP stock is a solid buy based on future growth for long-term investors. I’m a millennial myself, having bought this stock a few years back with the full knowledge I wouldn’t be selling any time soon (as in, decades from now). However, I bought even more recently on the news that CP stock won the bid for Kansas City Southern. Even as fellow rival Canadian National Railway attempted to take the acquisition out from under it. However, with the support of the United States Surface Transportation Board, the deal is all but complete.
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A deal to be had
CP stock will now become the largest railway in North America. It will stretch from Canada in Vancouver all the way down to Mexico. It will go through several agricultural and oil and gas routes, adding a significant amount of revenue to its balance sheet. Granted, it’s at a steep price of US$31 billion. This will surely cause a large debt that will take a long time to pay down. But the purchase of KCS will absolutely help it pay the debt faster.
In fact, banks are increasing the potential return for CP stock, believing it to be one of the most significant growth opportunities among global stocks on the TSX today. That being said, shares of CP stock are down 9% in the last month as of writing. And this again comes likely from the significant price tag for those seeking funds in the next few years. But for those of us seeking a long-term hold, today is an absolute steal.
A long-term hold
Shares of CP stock currently trade at a P/E ratio just above value territory at 17.15, and within value territory with an EV/EBITDA of 14.06. CP stock is pretty much where it was a year ago, but is still up 1,560% in the last two decades! Also, CP stock offers a solid dividend yield of 0.91% as of writing. It’s not much, but it’s just enough to give you an added bonus you can use to reinvest in this blue-chip company for decades.
In fact, let’s say you used today’s pullback as an opportunity to buy this stock in bulk. If you used half of your Tax-Free Savings Account (TFSA) contribution room, that’s $37,750 to invest. That would bring in 455 shares as of writing. That would mean bringing in an additional $345.80 of dividends each and every year right now, no matter how CP stock performs in the future. But given the significant growth analysts expect, this is one I’ll be reinvesting in for decades to come.
