A $1,000 Investment in CNR Stock 20 Years Ago Would Be Worth This Much Today

Canadian National Railway has returned over 1,600% to shareholders in the past 20 years. Is CNR stock still a good buy?

| More on:
rail train

Image source: Getty Images

Canadian blue-chip stocks have created massive wealth for shareholders in the last 20 years. In this period, these large-cap giants have wrestled with the dot-com bubble, a global financial crisis, the COVID-19 pandemic, inflation, and recent interest rate hikes.

But generally, blue-chip companies enjoy wide economic moats and stable gross margins, allowing them to maintain cash flows and earnings across market cycles. One such top TSX stock is Canadian National Railway (TSX:CNR), a company trading at an enterprise value of $117.6 billion.

In the last 20 years, CNR stock has returned 1,140% to shareholders. After adjusting for dividends, total returns are higher at 1,640%. So, a $1,000 investment in CNR stock in September 2003 would be worth $17,360 today. Comparatively, a similar investment in the TSX index would be worth less than $5,000 in this period.

While Canadian National Railway has crushed broader market returns, let’s see if it remains a compelling bet at the current valuation.

The bull case for Canadian National Railway stock

Railroad stocks such as Canadian National Railway were primarily responsible for the investment boom experienced in North America in the last century. Over 100 years later, they remain a critical part of the economy.

While transportation stocks are generally cyclical, railroad companies perform better amid economic downturns as they are better capitalized than trucking and aviation companies. For instance, when oil prices rise, truckers and airlines see a steep decline in profit margins. But as railroad companies can transport a significant amount of cargo, the bottom-line dip is negligible.

Canadian National Railway operates over 20,000 miles of track spanning three coasts. With more than 40 distribution centres in North America and 23 intermodal terminals, the company transports goods across 13,000 origin and destination ports.

CN is a trade enabler and is essential to the economy. It transports over 300 million tons of natural resources, manufactured products, and finished goods across North America each year. It aims to create value for customers and shareholders by leveraging the strength of its network and focusing on operational efficiencies.

With $50.7 billion in total assets, CNR reported revenue of $17.1 billion in 2022. It deployed $2.75 billion in capital expenditures, which should drive future cash flows higher. The company also reported a free cash flow of $4.3 billion, allowing it to pay shareholders an annual dividend of $3.16 per share, indicating a dividend yield of 2%.

What’s next for CNR stock price and investors?

In the last five years, CNR has increased sales by 5% annually while adjusted earnings and free cash flow grew by 8% and 14%, respectively. This allowed CNR to increase dividends by 13.6% annually in the last nine years.

Despite its massive size, analysts expect CNR to increase sales to $17.75 billion in 2024. Moreover, its adjusted earnings are forecast to expand from $7.46 per share in 2022 to $8.3 per share in 2024.

Priced at 18.5 times forward earnings, CNR stock is reasonably priced and trades at a discount of 7% to consensus price target estimates.

Canadian National Railway can provide your portfolio with diversification and help you earn a steady stream of dividend income for years.

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

More on Dividend Stocks

Man data analyze
Dividend Stocks

This 5.3% Dividend Stock Is a No-Brainer as Trump’s Tariffs Hit

This dividend stock offers investors strong income should Canada be hit by Trump's tariffs.

Read more »

Map of Canada showing connectivity
Dividend Stocks

Trump’s Tariffs: 1 Canadian Stock to Dump and 1 to Buy Immediately

As Trump threatens tariffs on Canada, these are two top stocks to watch.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA: 4 Canadian Stocks to Buy Now and Hold Forever

These top Canadian stocks could give a big boost to your hard-earned TFSA savings in the long run.

Read more »

stock research, analyze data
Dividend Stocks

Prediction: These Could Be the Best-Performing Value Stocks Through 2030

Despite short-term challenges, these top Canadian value stocks could outperform the broader market by a wide margin in the coming…

Read more »

An investor uses a tablet
Dividend Stocks

Where Will BCE Stock Be in 5 Years?

Despite facing big short-term challenges, BCE stock’s strong market position, steady dividend, and long-term vision make it worth watching.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Want Safe Dividend Income in 2025? Invest in the Following 3 Ultra-High-Yield Stocks!

The market is full of great income stocks, but this trio can provide growth potential and safe dividend income for…

Read more »

A meter measures energy use.
Dividend Stocks

Power Up Your Defences: Canadian Utility ETFs for Steady Income

It is time to power up your defence strategy to withstand market uncertainty around a looming trade war with Canadian…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

What to Know About Canadian Railway Stocks for 2025

The Canadian National Railway (TSX:CNR) isn't the only railroad stock in town.

Read more »