Achieving new record highs has become common on the Toronto Stock Exchange. Tariff-induced trade headwinds persist, yet Canada’s primary stock market continues to register fresh records. However, no one can predict whether the positive momentum will sustain or come to an abrupt end.
Savvy investors, especially those with long-term horizons, know how to mitigate sudden downturns or market pullbacks. Investing in companies with a strong market position, a competitive edge, and an enduring business model is key to gaining headwind against extreme events.
Canadian Pacific Kansas City Limited (TSX:CP), or CPKC, is a solid choice for investors seeking a stock built for the long haul. This $103.5 billion railway operator is the TSX’s tenth-largest company by market capitalization. Besides its vast, extensive rail network, the long-term growth prospects are rock-solid.
At $111.22 per share, the year-to-date gain is 7.3%-plus. If you invest today, you can also partake in the modest but safe 0.8% dividend yield (18.8% payout ratio). Expect CPKC to dominate North America’s ground transportation industry, given its strong foundation following a strategic merger two years ago.
Once-in-a-lifetime deal
CPKC is the resulting entity following the merger of Canadian Pacific and Kansas City Southern in April 2023. The former acquired the latter for US$31 billion. Both parties consider the deal a once-in-a-lifetime occasion. It created the first single-line rail network connecting Canada, the U.S., and Mexico.
The 20,000-mile network aims to support economic growth throughout the continent. According to Keith Creel, CPKC President and CEO, it marks the beginning of a new chapter of railroad history in North America. The network is unmatched as it opens new options and expands its reach for customers.
“The public, environmental, competitive and safety benefits of this historic combination are extraordinary for our railroaders, communities, rail customers and the North American economy,” Creel added. CPKC offers freight transportation services and logistics solutions. Its supply chain expertise should also support customer growth.
With the continent’s railroad network, CPKC commits to creating value for stakeholders, bringing new jobs, economic growth, and environmental benefits to all concerned.
Latest financial results
In 2024, CPKC’s first full year, total revenue increased 15.1% year-over-year to $14.5 billion, while net income declined 5% to $3.7 billion. For Q1 2025, the top and bottom lines increased 7.8% and 17% to $3.8 billion and $909 million, respectively, compared to Q1 2024.
Creel noted the solid freight demand at the start of the year and believes the quarterly results demonstrate the power and resiliency of the unrivalled North American network. Other highlights intended for shareholders include a new 4% share buyback program and a 20% dividend hike.
Nadeem Velani, CPKC’s Executive Vice President and Chief Financial Officer, said the dividend will continue to be an important avenue for returning cash to shareholders. Management plans to gradually increase it over time with a payout ratio of 20% to 30%.
Blue-chip stock
Creel assures that CPKC’s long-term value proposition remains unchanged. However, amending the 2025 earnings guidance was necessary due to evolving trade policy and potential economic recession. The forecast through 2028 is high single-digit revenue growth. Still, you’d be investing in a blue-chip stock with solid growth fundamentals.
