Canadian National Railway Stock: Buy, Sell, or Hold?

Railways like Canadian National Railway (TSX:CNR) are great long-term options. But is now the time to buy Canadian National Railway stock?

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Few stocks can offer growth, income and defensive appeal, but that’s what Canadian National Railway (TSX:CNR) offers. And for those investors who are contemplating buying Canadian National Railway stock, here’s a look at the case to buy, sell, or hold the railroad.

The case to buy Canadian National Railway stock

There are a lot of reasons why Canadian National Railway stock should be on the radar of investors everywhere. First and foremost, we have the service that Canadian National provides.

Specifically, Canadian National hauls massive amounts of products, raw materials and finished goods to points across the entire continent. Those products can be anything from automotive components and chemicals to crude, manufactured products and wheat.

In fact, Canadian National’s rail network is among the largest railroads on the continent and the only railroad with access to three coastlines. That fact, along with the massive amounts hauled ($250 billion of goods each year), makes Canadian National Railway stock one of the most defensive picks on the market.

More importantly, Canadian National’s massive network makes it an arterial vein for the entire North American economy. This was evident in the most recent quarterly update, whereby Canadian National saw net income surge 50% to $2.13 billion.

That’s also part of the reason why Canadian National Railway stock continues to trade close to its 52-week high of $178.38. As of the time of writing, Canadian National trades up nearly 13% over the trailing two-year period.

And that’s not all.

Canadian National also offers investors a juicy quarterly dividend. That dividend currently offers a respectable (and growing) yield of 1.90%. And like some of the best dividend stocks on the market, Canadian National has an established cadence of providing annual upticks to that dividend.

The most recent uptick, which will be distributed next month, reflects a whopping 7% increase over the same period last year.

Should you sell or perhaps hold Canadian National?

The alternative cases are whether existing shareholders should consider selling or just holding on to Canadian National Railway stock. That view is based on the current stock price and where some believe the market is heading.

As mentioned above, Canadian National’s stock price continues to flirt with its 52-week high. And while the stock is up nearly 13% over the past two years, almost all of that growth was registered in the past three months.

If we look at the performance of the stock over the trailing three years up to the point of this most recent rally (late last year), the stock has nudged only 14% in those three years.

For investors looking for an exit to invest in a higher-growth option, the current stock price is a tempting offer. In a similar vein, current investors with longer-term horizons may opt to sit back and weather any volatility.

As further fuel to that view, it’s worth noting that Canadian National Railway stock has surged 56% over the past five years. Furthermore, let’s not forget that during that time, Canadian National has continued to provide annual bumps to its dividend.

Final thoughts: Should you buy, hold, or sell?

No stock is without some risk, and that includes even the most defensive stocks on the market like Canadian National. Fortunately, in the case of Canadian National, the railroad provides a necessary service to the entire market, resulting in one of the most defensive operations anywhere.

That defensive appeal is hard to ignore, particularly in a volatile environment.

Throw in a growing and juicy dividend, and you have one of the best long-term options on the market.

In my opinion, Canadian National is a must-have for any well-diversified portfolio. It may not offer a 7% yield, but it can provide growth, income and stability to last decades.

Buy it, hold it, and watch it grow.

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 Demetris Afxentiou has positions in Canadian National Railway. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

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