Owning high-quality companies for the long haul is the most important strategy when it comes to investing your hard-earned money in the stock market. And while there are plenty of high-quality stocks across the TSX, Canadian National Railway (TSX: CNR) is consistently one of the best and most reliable businesses that investors are looking to own for the long haul.
It’s no secret that both the stock market and economy are constantly cycling. However, while economic and market environments are constantly shifting, the truly great businesses keep delivering year after year.
These are the companies with strong advantages that competitors can’t easily copy, steady cash flows that don’t disappear in tough times, and management teams that know how to return value to shareholders.
That’s why, not only are these the best and most reliable stocks you can own, but the longer you own them, the more compounding works in your favour.
Over the years, dividends continue to grow, earnings are constantly increasing, and share buybacks create even more value for investors. That’s exactly why CN is one of the best Canadian stocks to buy and hold long term.
So, if you’ve got cash on the sidelines you’re looking to put to work, here are three reasons why Canadian National Railway is such a high-quality stock and one of the best to load up on today for the long haul.
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Canadian National Railway stock operates a massive network that provides lasting advantages
There’s no question that one of the most important reasons why CN is such a high-quality investment is that it operates one of the largest rail networks in North America, stretching over 32,000 kilometres across Canada and into the U.S.
Furthermore, its tri-coastal system, which connects major ports, factories, warehouses, and markets from the Pacific and Atlantic, down into the Gulf, gives it a massive competitive advantage.
Not only does its rail network stretch across the continent, but the industry has massive barriers to entry. Building anything like this today would be nearly impossible due to land rights, regulations, and huge capital costs. That creates a wide economic moat for Canadian National Railway stock, making it one of the most reliable stocks to buy and hold for years.
Furthermore, railroads are generally the most efficient way to move goods over long distances. That gives the entire industry a huge competitive edge and makes it far more reliable than other forms of transportation. So, CN, as one of the most dominant players in the industry, is even safer and more resilient for long-term investors.
CN’s transportation of essential goods adds to its resiliency
In addition to the competitive advantages that railroads enjoy, as well as CN’s specific advantages due to its massive tri-costal network, another reason why it’s one of the best stocks to buy and hold for years is the reliability of its operations.
Because Canadian National Railway moves essential goods like grain, lumber, oil, chemicals and more, the stock is incredibly reliable.
Furthermore, even if volumes soften a bit, the company has pricing power because shippers rely on its extensive network. And because railroads are the most efficient means of transportation, in worsening economic environments, rail often stays more reliable than trucks for long-haul freight.
Consistent dividend growth and shareholder-friendly capital returns
Because CN is so defensive and has such reliable operations, it’s no surprise that it’s constantly increasing its dividend and driving share price appreciation, making it the perfect stock to buy and hold for the long haul.
In fact, Canadian National Railway stock has increased its dividend annually for nearly three straight decades now. However, even with these consistent dividend increases, because the stock is constantly improving its margins and improving its earnings, the payout ratio stays comfortable, leaving plenty of room for future increases as earnings grow.
Furthermore, in addition to the dividend it offers, the company has shown it will often aggressively buy back shares when they look undervalued.
That’s why it’s no surprise that over the last decade, Canadian National Railway stock has earned investors a compounded annual growth rate of more than 8.8%, and why it’s one of the best stocks on the TSX to load up on for the long haul.
