Never Mind the Pipeline: CN Railway (TSX:CNR) Stock Is a Defensive Juggernaut

Here’s why Canadian National Railway Co. (TSX:CNR)(NYSE:CNI) is one of the few stocks an investor can turn to for steady, protected dividends right now.

| More on:

One of the biggest debates in the oil patch, and one that got a significant update on Tuesday, revolves around how to transport oil. Pipeline pundits have been divided, however, as to how much of an impact the now-reapproved Trans Mountain network expansion will have on affected stocks.

On the one hand, the prospect of eased supply bottlenecks will improve the economics of companies with Western oil sands operations. On the other, threats from other quarters remain: further regulations hover on the horizon, while carbon taxes and geopolitical tensions are combining feverishly to weigh on the oil patch. However, there’s one stock that wins whether the pipelines get built or not.

What does the new pipeline development mean for railways?

Let’s take a peek at Canadian National Railway (TSX:CNR)(NYSE:CNI) today. Out of the domestic rail operators listed on the TSX, it could be argued that CN Rail has to most to lose by an efficient pipeline network. Crude-by-rail has been one of CN Rail’s big innovations, intended to relieve the Albertan oil patch.

Chances are you might not have heard of CanaPux, even if you’re an energy investor. But CanaPux is one of the brightest new ideas in the oil space and a fascinating innovation by CN Railway. In a nutshell, it’s a system for mixing a polymer with heavy crude or bitumen to make it safer to transport by rail. This process allows CN Railway to operate competitively in the oil patch, offering diversification and a steady source of extra revenue.

Even without this branch of business, CN Rail is doing just fine, however. Its access to the deep sea port of Prince Rupert provides unparalleled access to a vast coast-to-coast network of supply chain partners and connects Canada with the rest of the world. In short, even if an amazingly efficient pipeline network sprang up overnight, CN Railway would still be one of the cornerstones of domestic industry.

A good investment — or a great one?

Returning to that access to industry: CN Railway carries over $250 billion worth of freight per year, with everything from agricultural supplies to machinery parts – and now, of course, those innovative fuel pucks we mentioned a moment ago. If you want to get technical about it, you could argue that CN Railway gives diluted access to all of these industries, making it one of the most sturdily diversified stocks on the TSX.

Don’t expect a challenger to come out of nowhere either. While there is of course one other major railway stock to consider holding, CN Railway’s market share is secure, straddling a network of tracks that spans the entirety of the country. Furthermore, its sheer efficiency makes CN Railway one of the true gems of the TSX, with an extremely impressive operating ratio in the low 60s.

The bottom line

CN Railway is one of the most stable dividend stocks a TSX investor can stash in their portfolio. It’s a great choice for a TFSA or RRSP for this reason, with its steady growth of payments over the years and peerless access to pretty much every Canadian industry reliant on swift supply chain management.

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 Victoria Hetherington has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. CN is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »