Better rail buy: Canadian National Stock or Canadian Pacific? | So Good News
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Canadians are fortunate that many exceptional companies do business domestically. This makes it easy for Canadians to buy stocks. In some cases, investors can find great companies operating in the same industry. Take the railway industry for example. Within this niche, there are two excellent blue-chip stocks that Canadians should consider buying today: Canadian National Railway (TSX:CNR) and Canadian Pacific Railway (TSX:CP).
In this article, I will discuss which of these two stocks would be a better buy for your portfolio.
Canadian National was incorporated in 1919 and is the larger of the two entities. It operates nearly 33,000 km of track, spanning from British Columbia to Nova Scotia. The company also runs tracks to Mexico. In 2019, this company was known to be a large stake in Bill Gates’ portfolio, with former Microsoft founder is Canadian National’s largest individual shareholder.
Canadian Pacific has been operating since 1881 and is a household name around the country. Like Canadian National, this company operates a massive track network (about 20,000 km). This company has been thrust into the spotlight over the past year and a bit due to the acquisition of Kansas City Southern.
In terms of revenue, Canadian National emerges as a clear leader. Over the past 12 months, this company has reported $15.4 billion in revenue. Compare that to 2018 revenue, which was reported at $14.3 billion. That represents a compound annual growth rate (CAGR) of nearly 2%. This has been reflected in the share increasing by around 39% during that period.
Although Canadian Pacific’s revenue is much lower, it still shows a promising trend. Over the past 12 months, this company has reported $8 billion in revenue. This compares to just over $7.3 billion in revenue in 2018. That represents a CAGR of around 2.3%, which is slightly higher than Canadian National’s growth rate. Over the past four years, the Canadian Pacific stock has risen nearly 79%.
A look at their yield
Both of these companies are also known to be solid dividend stocks. Canadian National is one of the strongest dividend stocks in Canada. It has managed to increase its distribution in each of the last 26 years. That makes it one of only 11 TSX-listed companies to reach this mark. Over the past five years, Canadian National’s dividend has grown at a CAGR of 12.2%. Investors can also benefit from a forward yield of 1.88%. Although not the highest, it is close to the 2% yield that I look for in dividend stocks.
Canadian Pacific is not as well known for its dividend growth. It has only managed to increase distribution in each of the last five years. However, it is good enough to include it as a Canadian Dividend Aristocrat. If the company keeps it up, it could one day boast a streak of dividend growth as impressive as the Canadian Nationals. Over the past five years, Canadian Pacific’s dividend has grown at a CAGR of 11%. This stock gives investors a forward yield of 0.78%.
In my opinion, if you are looking for a stable company that can provide you with a reliable dividend over time, Canadian National will be the stock for you. It is the larger of the two companies, and its revenue is almost twice that of Canadian Pacific’s.
However, younger investors should strongly consider investing in the smaller company. Canadian Pacific is growing rapidly, as evidenced by its larger stock valuation and rapid dividend growth. The acquisition of Kansas City Southern could also boost the company to new heights. However, it’s certainly more of a bet on the future compared to the more reliable investment you’ll get in Canadian National.