Investing in Dividend Aristocrats can be a savvy strategy for building long-term income. These companies have consistently increased their dividends over five years at least. When these stalwarts experience a dip in their stock prices, it presents an even more enticing opportunity for investors. Purchasing shares at a lower price not only allows for potential capital appreciation as the stock rebounds but also enhances dividend yields — effectively getting more bang for your buck. Yet, there’s one I’d consider above the rest.
CNR stock
Canadian National Railway (TSX:CNR) is a prime example of a Dividend Aristocrat that merits consideration, especially during market downturns. With a robust history of dividend payments and increases, CNR has demonstrated a commitment to returning value to shareholders. As of December 2024, the Canadian stock announced a quarterly dividend of $0.845 per share, translating to an annualized yield of approximately 2.30%.
In its third-quarter results for 2024, CNR reported a diluted earnings per share (EPS) of $1.72, marking a 2% increase from the same period the previous year. This performance underscores the Canadian stock’s resilience amid challenges such as labour disputes and wildfires — challenges that have impacted operations earlier in the year.
Despite these hurdles, CNR has maintained a strong operating margin of 39.63% and a profit margin of 31.66%, reflecting efficient management and operational effectiveness. The Canadian stock’s return on equity stands at an impressive 27.55%, indicating robust profitability relative to shareholder equity.
Future outlook
Looking ahead, CNR has outlined strategic plans focusing on fleet enhancements, the deployment of innovative technologies, and efforts to grow and strengthen its team. These initiatives are designed to drive future growth and improve operational efficiency, positioning the Canadian stock favourably in the competitive rail industry.
Analysts have a generally positive outlook on CNR, with several upgrades and a mix of buy and strong buy ratings, suggesting confidence in the company’s future performance. For instance, Jefferies Financial Group recently upgraded CNR from a hold to a buy rating, setting a target price of $120.
It’s worth noting that CNR’s stock has experienced some volatility, trading at $144.50 at writing, which is a 26% drop from its $181 52-week high reached on March 21. This dip presents a potential buying opportunity for investors looking to capitalize on the Canadian stock’s long-term growth prospects and stable dividend payouts.
Bottom line
CNR’s trailing price-to-earnings (P/E) ratio is 17.03, with a forward P/E of 17.54, indicating reasonable valuation levels compared to industry peers. The Canadian stock’s price-to-book ratio stands at 4.65, reflecting solid asset management and profitability. CNR’s extensive rail network, spanning approximately 20,000 route miles, provides a significant competitive advantage, enabling efficient transportation across North America. This vast infrastructure supports the company’s ability to generate consistent revenue and adapt to market demands.
Investing in Dividend Aristocrats like Canadian National Railway during periods of stock price decline can be a prudent strategy for building long-term income. CNR’s strong financial performance, commitment to dividend growth, strategic initiatives for future expansion, and current stock valuation make it an attractive option — especially for investors seeking stable returns in the transportation sector.
