There are different ways that investors measure whether an investment is strong. Some look for growth prospects, while others seek out income or value. One option I gravitate toward is a Canadian dividend stock I feel comfortable owning, even when market conditions sour.
This Canadian dividend stock stands out because it owns infrastructure that the economy keeps leaning on, even when markets turn volatile.
That Canadian dividend stock at the top of my list is Canadian National Railway (TSX:CNR). Canadian National isn’t one of those hyped-up AI stocks grabbing market attention. Nor is it offering the highest yield.
What it does offer is a business backed by essential infrastructure and staying power that’s hard to replicate. In short, it’s the Canadian dividend stock I trust most when markets get shaky.
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Why Canadian National Railway excels in rough markets
Canadian National is one of those businesses that quietly operates behind the scenes. Actually, let me rephrase that. Canadian National is one of the most important businesses on the continent.
Canadian National moves freight across and between Canada and the U.S. The company connects ports, warehouses, factories, farms, and energy providers across a vast rail network spanning 32,000 kilometres and three coastlines.
The importance of Canadian National’s rail network comes down to necessity. The goods that Canadian National hauls are needed regardless of how the market fares. That includes everything from automotive parts and raw materials to grain, consumer products, and crude oil.
In other words, Canadian National is a vital link to the entire North American economy. And that freight runs on an irreplaceable network which provides the railway with one of the largest defensive moats on the market.
Canadian National’s network was built over many decades. Since then, entire communities have built up around those tracks.
If a would-be competitor tried to challenge Canadian National, it would require massive capital, years of construction, and enormous regulatory hurdles just to approach a fraction of Canadian National’s scale.
For long-term investors, that built-in strength matters when markets become volatile.
Canadian National still has room to grow
Despite that impressive defensive appeal, one reason I like Canadian National is that the company isn’t just another defensive business or a Canadian dividend stock with a moat.
It also has room to grow over time.
Canadian National benefits from long-term demand for freight movement across North America. As population, trade, energy demand, agriculture, manufacturing, and e-commerce change, rail remains a critical part of the system.
Each year, Canadian National hauls over $250 billion worth of goods across its massive network. Canadian National keeps moving more of that freight efficiently, managing costs, and investing in its network with each passing year.
Railways can improve profitability through better efficiency and pricing power. And Canadian National’s efficiency ratings are often cited among the best in the sector.
This combination of efficiency and scale reinforces why Canadian National remains a top Canadian dividend stock for long-term investors.
A dividend stock powered by essential infrastructure
For prospective investors considering Canadian National as a Canadian dividend stock to own, the stock can be deceiving at first glance.
Canadian National doesn’t offer the highest upfront yield. In fact, as of the time of writing, Canadian National offers a yield of just 2.2%.
But a higher yield doesn’t always mean better income.
The lower yield allows Canadian National to reinvest into the railway network, return cash to shareholders, and maintain some financial flexibility.
What really makes this Canadian dividend stock attractive, though, is the dividend growth profile. Canadian National has amassed a history of rewarding shareholders with annual upticks.
The current streak of annual increases to that dividend extends over three decades. That fact alone makes this Canadian dividend stock a compelling dividend option for long-term investors.
Are you buying Canadian National?
No stock is without risk, and that includes an otherwise defensive titan like Canadian National. Fortunately, Canadian National offers investors a few key advantages, including its defensive network, essential service, and stable, growing dividend.
In my opinion, Canadian National should be a core holding in any well-diversified portfolio.
Buy it today, hold it for decades, and watch your portfolio (and income) grow.
