On the core of each well-diversified portfolio is the necessity for a number of defensive shares. Many traders flip to utilities and telecoms to satisfy that want, however there’s an alternative choice to contemplate: railroads similar to Canadian Nationwide Railway (TSX:CNR). In reality, shopping for Canadian Nationwide Railway makes good sense proper now.

Right here’s a take a look at why you need to think about shopping for Canadian Nationwide.

First, let’s debunk the stereotype

Canadian Nationwide and its friends are sometimes seen as boring investments that lack any development. Moreover, that stereotype additionally views railroads as dated, lower-tech choices from the final century.

Whereas railroads have been round for over a century, they’re neither dated nor lower-tech choices.

In reality, CN has invested a major quantity through the years to put money into upgrading the know-how round its signaling and scheduling, permitting the railroad to haul extra freight faster.

And CN hauls a whole lot of freight. The railroad hauls roughly $250 billion value of products and supplies every year. That freight will be something from automotive elements, chemical compounds, and uncooked supplies to wheat, completed items, and crude oil.

That freight is hauled alongside one the most important railroad networks in Canada and among the many largest on the continent. In case you’re questioning, CN’s rail community measures over 40,000 km in dimension and is the one rail community in North America that has entry to 3 separate coasts.

The defensive enchantment of CN is off the charts

The sheer degree of attain and the financial exercise its accountable for makes CN among the many most defensive investments to contemplate shopping for.

However that’s not even one of the best half.

A lot of that rail community traverses communities and cities throughout the continent. In reality, lots of these communities and cities have been constructed across the tracks themselves. This makes it an almost unattainable feat for any would-be competitor to emerge and try and construct a competing community.

Moreover, the urge for food for mergers and acquisitions of between bigger Class I railroads similar to CN and its friends has been in decline for the reason that 90s. Particularly, solely a single merger has transpired amongst main railroad operators was authorised in effectively over twenty years.

Once more, this speaks volumes of the defensive enchantment of a railroad, and could also be cause sufficient to for some to contemplate shopping for Canadian Nationwide Railway

What about revenue?

One other key cause why traders might wish to think about shopping for Canadian Nationwide Railway is for the dividend it presents.

As of the time of writing, CN’s dividend works out to a good 1.88%. That won’t sound too interesting, not less than initially, to some income-seeking traders.

Luckily, there’s extra to contemplate. First, we’ve dividend development. CN has supplied annual bumps to that quarterly dividend with out fail for over twenty years. Factoring in that dividend development reveals the return to be effectively into the double digits.

In different phrases, CN is an excellent long-term choice to purchase now and neglect about for a decade or extra.

Shopping for Canadian Nationwide Railway is smart

Each inventory carries some threat, together with Canadian Nationwide. Luckily, Canadian Nationwide offers vital defensive enchantment, robust development potential and a tasty dividend to maintain long-term traders happy.

For my part, not solely does shopping for Canadian Nationwide Railway make sense, however the railroad must be a core holding as a part of any well-diversified portfolio.