There are stocks that investors buy for long-term growth, and others to buy to generate income. Finally, there are some that can cater to both income and growth-seeking investors alike. Those stocks are prime candidates to hold forever.
One such stock to hold forever is Canadian National Railway (TSX:CNR), and here’s why it stands out right now.
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Meet Canadian National
Canadian National Railway is one of the largest railway networks in North America. The company offers a unique competitive moat that includes access to three coastlines.
That allows Canadian National to provide reliable long-term returns for investors, highlighting efficiency, pricing power and resilience that prevail across economic cycles.
The railway hauls everything from chemicals and automotive products to crude, raw materials, and wheat. In total, Canadian National transports nearly $250 billion worth of goods across its network each year.
Each of those product categories is diversified, allowing a pullback in one segment to be offset by growth in others.
The real reason to buy and hold forever
One of the main reasons why investors should consider buying Canadian National is its massive 32,000-kilometre network. That network is a core defensive moat that stretches from coast to coast and down through the U.S. Midwest to the Gulf region.
From a logistical standpoint, that toll bridge moat is something that is completely irreplaceable. To even consider a competitor building out a rival network on that scale would require hundreds of billions in investment and decades of construction costs.
Even better, the railway has worked to establish exclusive port deals, such as Prince Rupert and build out intermodal hubs to lock in customers. This directly translates into operating ratios of 62%, providing Canadian National with world-class efficiency.
It also allows the railway to generate ample cash flows that allow it to invest in growth and pay out a tasty quarterly dividend.
That fact alone makes it a stock to hold forever, but the railway still offers one more intriguing point to consider.
Let’s talk about Canadian National’s dividend
Canadian National offers investors a quarterly dividend. As of the time of writing, that dividend pays out a respectable 2.6% yield.
This means that investors who drop $10,000 into the stock (as part of a larger, diversified portfolio) can expect to earn approximately $260 each year.
That’s not enough to retire on, but it can provide almost two full shares through reinvestments alone. For investors who are not ready to draw on that income yet, it can provide years of uninterrupted growth without investing more.
Adding to that, prospective investors should note one more appealing point.
Canadian National has provided investors with generous annual bumps to that dividend going back nearly decades without fail. Not only does this mean that the CAGR for the railway is approximately 8%, but it also highlights how consistently Canadian National has rewarded long-term shareholders.
Throw in the fact that the railway trades at an attractive P/E of 18.5, and you have an excellent long-term option to buy now and hold forever.
Will you buy Canadian National and hold forever?
Canadian National offers investors a unique mix of growth and income-earning potential wrapped in one of the best defensive moats on the market.
The yield is lower than some high-income picks but comes with superb long-term growth potential and decades of increases.
In my opinion, Canadian National remains a great pick for any well-diversified portfolio.
Buy it today and hold it forever.
