Have you considered adding a railway stock to your portfolio? Despite what appears to be a relic of the last century, railway stocks such as Canadian National Railway (TSX:CNR) hold plenty of long-term potential. So, is it the right time to buy Canadian National?
Let’s try to answer that question.
Source: Getty Images
Meet Canadian National
Canadian National is one of the largest railways in North America. The railway boasts an impressive track network of over 31,000 km.
That network stretches across the continent from west to east and then down the Midwest to the Gulf Coast. This gives the railway access to three coastlines as well as major connections to factories, storage facilities, and ports across the continent.
That access is so important that railroads have been compared to being the arterial veins of the entire North American economy. The reason for this is that the railroads haul massive amounts of cargo further than other means of transport.
In the case of Canadian National, the railway hauls upwards of $200 billion of goods each year. That mix includes automotive components, manufactured goods, raw materials, chemicals, crude precious metals, grains, and more.
An interesting point for prospective investors to note is that Canadian National maintains a well-diversified mix of products hauled. This ensures that a slowdown in demand for one hauled product won’t have too much of an impact on the entire load.
Despite that impressive appeal, the stock is trading lower at the moment. As of the time of writing, Canadian National trades at a whopping 20% lower over the past 12-month period.
That drop can be attributed to a variety of factors, including interest rates, the risk of tariffs, last year’s wildfires and even a trade dispute.
That being said, prospective investors should focus more on the opportunity the railway has for long-term growth, given the current discounted price amidst overall market volatility.
That fact alone could be an argument that now is the time to buy Canadian National.
One more reason to love Canadian National
Another key point for prospective investors contemplating whether it’s time to buy Canadian National is the company’s quarterly dividend.
Canadian National pays out a quarterly dividend that currently carries a yield of 2.64%. That’s not the highest return on the market, but it is well-covered and continues to see annual upticks.
In fact, Canadian National has provided annual upticks to that dividend for 29 consecutive years without fail. Over the past decade, Canadian National’s dividend-growth rate has worked out to an impressive 13.9%.
And despite the short-term challenges facing the stock, the company is investing $3.4 billion in capital projects and forecasting earnings-per-share growth to hit 10-15% for fiscal 2025.
That makes Canadian National an intriguing option for investors looking for a buy-and-forget candidate for any portfolio.
