Is This Canadian Railroad Worth Buying Right Now?

Here’s why Canadian National Railway (TSX:CNR) ought to be on every long-term investor’s watch list right now.

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Freight Train

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After the COVID-19 pandemic, the in-land transportation sector took a big hit, as both passenger and freight revenues declined. Canada’s largest class one freight railway company, Canadian National Railway (TSX:CNR), was also not an exception in this regard. 

However, with life returning back to normal, this sector has been experiencing increasing revenue and traffic. This, in turn, has enabled Canadian National Railway to generate increased profit and offer better returns to its shareholders. Individuals willing to invest in the railway transportation sector can consider investing in this company. Here are a few reasons why. 

Canadian National Railways increases dividend

As per recent reports, Canadian National Railway has decided to increase its annual dividend payment to $0.79 per share. Payable on March 31, 2023, the company’s dividend yield and payout ratio stand at 1.91% and 39.14%, respectively, at the time of writing.   

This decision is a result of strong business earnings and cash flow that has facilitated a stable rise in dividend payments in the last few years. 

CNR posts solid Q4 2022 and yearly results

In the fourth quarter (Q4) of 2022, the Canadian National Railways reported earnings worth $1.42 billion, much higher than last year’s comparable numbers of $1.2 billion. Doing the math, this represents a year-over-year increase of 23%. 

The company’s earnings per share (EPS) also surged. This past quarter, Canadian National’s EPS came in at $2.10, representing significant year-over-year growth. Furthermore, the company’s overall net income number of $5.12 billion was a big jump from the company’s income in 2021, which was around $4.90 billion. 

According to CNR, this appreciation in revenue can be attributed to several factors. Primarily, it is a result of the increasing fuel surcharge revenue due to the rising fuel prices. High transportation volume of grains in the U.S. and rise in freight charges also played an important role. Additionally, there has also been the positive impact of the declining Canadian dollar.  

Bottom line

Canadian National Railway remains a top option for long-term investors looking to bet on Canadian, and North American, growth. As a key railroad servicing many key markets in North America, one may view CNR stock as a bet on the overall economy. For optimists out there, this is the sort of stock to buy on dips and hold forever.

This is also among the most fundamentally sound and stable growth stocks in this space. Thus, as far as any North American railroad is concerned, I think CNR stock should be near the top of the list.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

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