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  5. CNR: I've held Canadian National Railway (CNR) for over eight years, achieving a modest return of about 8% per annum, which has lagged the broader Canadian market. [Canadian National Railway Company]
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Q: I've held Canadian National Railway (CNR) for over eight years, achieving a modest return of about 8% per annum, which has lagged the broader Canadian market. As a retired investor seeking both income and growth, I’m considering swapping my entire CNR position for TFI International (TFII). CNR has provided stability and a reliable dividend—currently around 2.3%—but its growth has been underwhelming, and it trades at a relatively high valuation, around 19-20 times forward earnings. In contrast, TFII appears undervalued, trading at roughly 15-16 times forward earnings, with a stronger historical growth trajectory, driven by its trucking and logistics operations and savvy acquisitions. However, its dividend yield is lower, at about 1%, and it’s more cyclical than CNR’s rail business. Given my goals and the small capital gain I’d realize in my taxable account from selling CNR, does it make sense to trade all of my CNR for TFII? How do their risk profiles, income potential, and long-term growth prospects compare for someone in my position?

Asked by Maury on March 24, 2025
5i Research Answer:

We would rather own both than do a wholesale switch. With taxes, assuming a high tax rate, TFII would need to do significantly better to offset the lower amount of invested capital after the tax hit. We do think TFII recovers, but it is going to require patience. But we like its long term history and trajectory. We would be comfortable buying, but think one can proceed slowly. We may yet see a recession. We would view CNR as much less risky. Not only is it 9X as large, it also operates in largely a two-company oligopoly, and it is in an harder-to-enter business. TFII has been more aggressive raising its dividend, so likely has better longer term income potential, or at least yields will likely get closer over time. Even with recent forecasts, TFII should have slightly higher short term growth. However, the longer term of course is always harder to call. We think owning some of each makes the most sense. 

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