Thursday , September 24 2020
Home / canada / Why this population of dividend growth is perfect for your TFSA account

Why this population of dividend growth is perfect for your TFSA account



[ad_1]

Dividends can be a good way to generate revenues. Over time, dividend payments can add important amounts of capital, especially when companies are carefully selected for their ability to increase dividends. Dividend growth companies are also perfect for TFSA accounts, which are best suited for a long-term investment strategy.

These criteria do Canadian National Railway (TSX: CNR) (NYSE: CNI) one of the main TSX shares for TSFA investors. As the largest railway company in Canada, CNR has the largest market share in an almost impregnable industry. CNR has paid dividends every year since 1996 and, in general, dividend payments have increased year after year.

Over the past four years, the CNR has increased its dividends by 33%. At present, the company has a dividend yield of 4.82%, with a payment ratio of 23%, which should be well for income-oriented investors and those seeking a stock of growth of Dividends that are included in your TFSA. We consider two reasons why CNR is a good investment option.


The CNR is underestimated

There are good reasons to believe that the CNR is currently underestimated. The current P / E of the company is 12.85, which is lower than the average of the TSX. The CNR stock is also cheaper than its main competitor in Canada, Canadian Pacific Railway.

Buying shares of a company at a price lower than its intrinsic value is always a good idea.


CNR works like a well lubricated machine

CNR's recent earnings reports were encouraging. The company posted increases in income, operations and net income, and earnings per share. CNR is also generating benefits more efficiently. The profitability of the company's capital has increased 13% in the last five years, while the net profit margin increased 16% during the same period.

While the CNR has always been considered one of the most efficient railway companies, the company has had some problems at the beginning of the year. An increase in demand caused the congestion of the CNR network, which caused several unsatisfied clients and the fall in the price of their shares.

However, the CNR pledged to face the problem and increased its capital budget spending to $ 3.2 billion, which was a record for the company. CNR also hired 400 train drivers during the first quarter alone.

CNR's efforts to return to the right path were rewarded. The income from the second quarter of the company was excellent, and its purchase price recovered from its first quarter. While the CNR has not escaped the recent stock of highly volatile values, company testimonials respond appropriately to a bit of crisis, the way the CNR was an encouraging sign for investors.


The conclusion

CNR has demonstrated its ability to sustain both the growth of incomes and the dividend increasing, while expecting an unexpected increase in demand and maintaining efficiency at an optimal level. The company is also underestimated, which means that it is now a good time to buy shares of the railway giant. TSFA investors should take note.


The collaborator of madness, Prosper Bakiny, has no position in the aforementioned companies. David Gardner has shares of the Canadian National Railway. Motley Fool has Canadian National Railway shares. Canadian National Railway is a recommendation of Canada stock adviser.

[ad_2]
Source link