The Best Canadian Stock for an RRSP

Looking for a stock you can hold for decades? 

Andrew Willis 12 February, 2024 | 4:29AM
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Key Takeaways for CN Rail Stock:

  • With a wide moat and a medium uncertainty rating, CN rail has the makings of a long-term stock hold for retirement – however an RRSP isn’t always the best spot for stocks since your capital gains and eligible dividends will be taxed as income when withdrawn.
  • If you’ve met your allocation of fixed income based on years to retirement, you’re looking for individual equities and you have the contribution room, CN rail could be a solid bet.
  • CN rail might not be the most appealing bet at this moment – it’s fairly valued and closely connected to the economy, which is a risk if we head into a recession – but time in the market beats timing the market.

Andrew Willis: You’re probably not surprised to hear that one of the best long-term stock picks in a retirement portfolio is a wide moat, medium uncertainty-rated Canadian railroad that’s been in business for more than a century.

But perhaps you’d be surprised to hear that when discussing investments for RRSPs, specifically, there are reasons you might not want to pick up a compelling railroad stock like Canadian National Railway CNR just yet.

Sure, CN rail stock has a stellar trailing return of 15.65% annually over the past 15 years and the company is essentially a cornerstone of the Canadian economy. But is this great long-term capital appreciation play really the best fit for an RRSP, where it will be withdrawn as income?

From a tax perspective? Maybe not. If you only have so much RRSP room, you might want to prioritize income-producing assets in an account that’s taxed as income. But other factors, depending on your individual financial situation, may tilt the scales towards keeping or buying CN Rail stock for your RRSP.

CN Rail’s Recently Rising Dividends are Income Too

Let’s say you already have enough fixed income based on your years to retirement and you’ve maxed out your TFSA. If you have RRSP contribution room, then this stock with a serious competitive advantage could be a great bet. Senior equity analyst Matthew Young says that while ocean liners, aircraft, and trucks also haul freight, railroads like CN are by far the low-cost option where there’s no waterway connecting the origin and destination. And the cost advantage is most apparent with low-value bulk goods.

Lastly, we do see CN’s edge to be a bit priced in at the moment as the stock trades around our fair value, but for the longest-term stock bets – timing probably matters the least.

For Morningstar, I’m Andrew Willis.


bulls CN Rail Stock Bulls Say

  • Over the past year, CN has reinvigorated its precision railroading roots, narrowing the margin gap with peers.
  • We expect international and domestic intermodal volumes to flip positive this year as retail sector restocking activity improves and truckload competition abates.
  • CN's exclusive access to the port of Prince Rupert should continue to support long-term growth opportunities for international intermodal business.

bears CN Rail Stock Bears Say

  • Grain carload-volume growth will likely take a breather in 2024 on a less robust late-2023 harvest and a less favorable export backdrop (to China).
  • Intermodal pricing headwinds from depressed rates in the competing truckload sector will linger into first-half 2024.
  • The STB oversees railroads’ pricing in the U.S., so there will always be underlying risk of reregulation in terms of a policy shift to a more heavy-handed approach.


The author or authors do not own shares in any securities mentioned in this article.

Image credits:

1- Fabian Blank on Unsplash

2- Associated Press

3- PiggyBank on Unsplash

4- Associated Press

5- Associated Press

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canadian National Railway Co157.35 CAD-1.64Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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