Railroad investments such as Canadian National (TSX:CNR) can be lucrative additions to any well-diversified portfolio. That view is especially true now as Canadian National Railway is near its 52-week low.
Here’s a look at the stock and why it could be the perfect thing for your portfolio.
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Meet Canadian National
Canadian National is one of the largest railways on the continent. CN boasts an impressive network stretching over 32,000 km. That network stretches from coast to coast and then down through the U.S. Midwest to the Gulf Coast.
That’s a unique factor that connects CN’s network to three different coastlines. More importantly, it’s not the only advantageous factor that the railroad boasts.
CN hauls goods across its vast network. Those goods can be anything from automotive parts, chemicals and raw materials to precious metals, wheat and crude oil. This diversified mix of products, coupled with CN’s vast network, makes it one of the most defensive picks on the market.
The importance of that rail network is often compared with being an arterial vein for the entire North American economy.
But that’s not all.
As mentioned above, Canadian National Railway is near its 52-week low. As of the time of writing, the stock trades at just over $128. Year to date, the stock is down 11%, and over the course of the prior 12-month period, that dip extends to 18%.
But the fact that Canadian National Railway is near its 52-week low doesn’t make the stock a great buy on its own.
To answer that, there are a few other key reasons to note.
Why Canadian National belongs in your portfolio
The first question to answer is why. Canadian National Railway is near its 52-week low for several reasons, but much of that dip, and subsequent volatility, can be traced back to trade and tariff discussions.
More specifically, that dip comes down to the sheer importance of the rail network on both the American and Canadian economies. As a result, the railway is trading at a discounted level with a P/E of 17.66.
Adding to that appeal is Canadian National’s continued strong results, despite that dip in stock price.
In the most recent quarter, Canadian National reported an operating income of $1.6 billion, reflecting an $80 million, or 5% increase over the prior period. That gain comes despite the railway reporting revenues for the quarter of down 1% over the prior period, at $4.27 billion.
That resilience is worth noting and can be traced back to Canadian National’s stellar operating efficiency. The railway is often praised for its efficiency ratio, which came in at an improved 61.7% during the quarter.
Another reason investors love Canadian National
Canadian National Railway is near its 52-week low, but it’s still regarded as a stellar income-producer. The recent dip in Canadian National’s stock price has pushed the railway’s tasty dividend up to an impressive 2.77%.
To put it another way, investing $30,000 into Canadian National right now will produce an income of just over $830. For those investors not ready to draw on that income yet, it can be a lucrative way to automate growth through reinvestments.
Adding to that appeal, Canadian National has provided annual increases to that dividend without fail for nearly three decades.
That fact alone makes Canadian National one of the must-have investments for any investor seeking a discounted stock that can provide income and growth.
Canadian National Railway is near its 52-week low. But does it matter?
No stock is without some risk. Market fluctuations are to be expected and capitalized on by investors.
In the case of Canadian National, the recent dip in its stock price should be seen as a stellar opportunity to buy a great stock at a hefty discount.
In my opinion, Canadian National should be a core holding in any well-diversified portfolio.
