The railway stocks have fallen off the rails in recent years, thanks in part to industry headwinds and mounting fear of the impact Trump’s tariffs will have. Indeed, less trade between the U.S. and other nations, most notably Canada and China, isn’t exactly conducive to big gains for the top rail plays. And while the rail stocks seem like a major sell right here as they fail to gain meaningful traction, I continue to view them as wide-moat firms that are more than worth owning for the long haul.
Indeed, nobody knows what the state of trade will be next quarter, next year, or even in the hands of the next U.S. president. Either way, those with a six-year time horizon can still do well with the top Canadian rail stocks.
Among the top industrials, rail stocks could benefit most from a new trade deal that steers the economy away from an economic downturn. While a recession seems likelier each day without trade progress, investors should seek to steer their steady TFSA portfolio through a recession and bear market rather than seeking to avoid all of the damage.
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Don’t bet against the rail icons!
Indeed, as the great Warren Buffett put it this weekend, during his legendary conglomerate’s 2025 annual meeting with shareholders, the latest bout of volatility is “really nothing.” Indeed, intense stock market volatility is the price you’ll pay for being in stocks, arguably the best wealth-creating asset out there! In any case, taming volatility could prove harder if tariffs take the economy into a bit of a tailspin.
Either way, the railways, which Buffett’s firm owns a whole piece in via Berlington Northern Santa Fe (BNSF) Railway, will run off the tracks occasionally as the economy takes a rough turn. But given their wide moats and ability to deliver once the economy turns a tide and the bull roars again, they’re worth hanging on through the bad times just as much as the good.
CP Rail stock is a gem worth holding for more than six years
Regarding CP Rail (TSX: CP), it has less yield to offer compared to most other railways that have rolled lower in recent quarters. Despite the lacklustre dividend yield (currently sitting at 0.9%), I view CP as the highest-growth railway and one that should be preferred among younger investors with lengthy time horizons and less need for dividends in the present. Despite CP stock’s modest yield, the dividend is growing pretty quickly and could grow to become a huge contributor once one is ready to retire in 10-15 years.
Believe it or not, a yield close to 1% is on the high end for CP Rail, with substantial pressure on shares and a recent 20% dividend hike gifted to shareholders. Sure, a 20% dividend raise on a small dividend doesn’t seem like a big deal. That said, the above-average dividend raises do add up. And over time, they can make all the difference for dividend-growth investors.
In any case, the stock looks way too cheap after earnings. Sure, tariffs could hurt earnings growth, but in the longer term, I still view CP as a powerful force in cross-border transportation with its unique network that spans Mexico, Canada, and the United States. That’s exposure that can’t be found elsewhere!
In short, the stock’s an excellent bet while it’s hovering around $100, and I think it’ll be closer to $150 in six years’ time despite the tariff impact.
