For Canadians, there is only two options to invest in the railway oligopoly and it’s either Canadian Pacific or Canadian National Railway. They not only cover Canada from coast to coast but they also cover part of the US.
To this day, railway transportation is still one of the most cost effective way to move goods across North America. It makes for a business worthy of investing and the question at hand is which one should you buy?
Railway Stocks Overview
Canadian National Railway
Canadian National Railway is a leading transportation and logistics company in North America. The company owns the only transcontinental railway line in North America and provides intermodal, trucking, freight forwarding, warehousing and distribution services. As North America’s leading supply chain player, Canadian National Railway carries more than 300 million tons of cargo annually. It is a fully integrated rail and transportation services company and is the top mover of aluminum, iron ore and base metal ore in North America. Canadian National handles over 50% of all Canadian chemicals production and services the three major petrochemical centers in North America. Its product portfolio is well diversified with intermodal accounting for 25% of revenues, followed by petroleum & chemicals, and grains & fertilizers each at 17%. Forest products, metal, minerals, automotives, etc. constitute the remainder. The company transports goods worth more than $250 billion annually for a wide range of business sectors, ranging from resource products to manufactured products to consumer goods.
Canadian Pacific Railway is a leading Canadian transportation company that moves goods and commodities from Montreal to Vancouver in Canada and in the U.S. Midwest and northeast regions. The company also has easy access to international markets, given its large network of 12,500 miles railways, more than 100 transload facilities across Canada and the U.S. and linkages to key ports in the east and west coast. Canadian Pacific is known for its reliable and efficient movement and delivery of critical goods to a diversified group of customers in the automotive, food products, energy, industrial and other key markets. It is the only Class 1 railway with significant grain franchises in both Canada and the US. Bulk goods comprised 41% of Canadian Pacific’s 2018 freight revenue followed by Merchandise Goods (37%) and Intermodal (22%). With decades of experience, Canadian Pacific has established long-standing relations with Class 1 and short-line railroads.
Stock Comparison: CNR vs CP
Is CNR or CP a better buy today?
Both companies are solid now after being managed by Hunter Harrison (RIP). Given the drop in stock prices, it’s an opportunity got to get in. Canadian Pacific was behind for a while but the management team has taken control back. If you prefer stability, I would suggest Canadian National Railway as they have been more consistent and that’s why it scores higher due to consistency over 10 years. On the other hand, CP has a lower P/E and a lower dividend payout ratio giving it higher potential growth. Overall, CNR covers more ground across North America through its railway but CP is present in all the major stations in Canada.
Both have dividend growth in the double digit so you may chose the highest yield of the two stocks for a new position but then you probably want to add enough to DRIP if you have many years ahead of you. If you are approaching retirement and living on the income, the highest yield is probably good enough.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.