BCE Inc. or Canadian National Railway Company for Your Retirement Fund?

BCE Inc. (TSX:BCE)(NYSE:BCE) and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) are two of Canada’s top companies. Is one a better bet today?

| More on:

Canadian savers don’t always have time to keep tabs on the daily performances of their TFSA or RRSP stock holdings.

In fact, many people would prefer to simply buy a few quality names and simply forget about them for a couple of decades until they need to cash out to fund their retirement.

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) to see if one is an attractive pick today.

BCE

BCE continues to build on its dominant position in the Canadian communications industry.

The company closed its acquisition of Manitoba Telecom Services earlier this year in a deal that bumped BCE into the top spot in the Manitoba market and set the company up for an expansion of its presence in the western provinces.

BCE’s mobile, wireline, and internet businesses are best known to investors, but the company also has a large media division that includes sports teams, radio stations, a television network, specialty channels, and an advertising agency.

The company also owns retail outlets across the country.

When all of these assets are combined with the wireless and wireline network infrastructure, you get a powerful company surrounded by an impressive moat. Think about it — BCE has the capability to interact with most Canadians on weekly, if not daily, basis.

The company pumps out adequate free cash flow to support its generous dividend and has the leisure of raising prices any time it needs a bit of extra cash.

That might irk customers, but it’s good for shareholders.

At the time of writing, BCE’s dividend provides a solid 4.7% yield.

CN

When it comes to wide competitive moats, CN probably takes the cake.

The company is the only railway in North America with tracks connecting three coasts, and the odds of new lines being built along the same routes are pretty slim.

CN still has to compete with truck companies and other rail carriers on some routes, so it works hard to ensure it’s operating as efficiently as possible. CN regularly reports the industry’s best operating ratio and is widely considered the best-run company in the sector.

Like BCE, CN generates significant free cash flow and does a good job of sharing the profits with investors. In fact, the compound annual dividend-growth rate for the past 20 years is about 16%.

CN gets a large part of its earnings from the U.S. operations, providing a nice hedge against economic downturns in Canada. In addition, profits get a decent boost when the American dollar rallies against the loonie.

Is one more attractive?

BCE provides a better yield, but CN likely offers stronger dividend-growth prospects along with important exposure to the United States.

If you have the funds, it might be worthwhile to add a bit of both stocks to your TFSA or RRSP portfolio to get good yield and benefit from economic growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of BCE. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

More on Investing

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

stock research, analyze data
Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

There are opportunities and risks on the horizon for the Canadian banks.

Read more »

Young Boy with Jet Pack Dreams of Flying
Stock Market

Is Air Canada Stock a Good Buy After Its Q3 Results

Down almost 60% from all-time highs, Air Canada is an undervalued TSX stock that remains an enticing investment in November…

Read more »

cloud computing
Investing

Where to Invest $10,000 in November

Given their solid underlying businesses and healthy growth prospects, I expect these two defensive stocks to outperform uncertain outlook.

Read more »

coins jump into piggy bank
Retirement

Here’s the Average RRSP Balance at Age 44 for Canadians

Holding stocks like Alimentation Couche-Tard (TSX:ATD) in an RRSP is a good way to build your wealth.

Read more »

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »