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Why These Stocks of Dividends Are Perfect for Your TFSA Account

Dividends can be a great way to generate income. Over time, dividend payments can add a large amount of capital, especially when companies are carefully selected because of their ability to increase dividends. Companies with dividend growth are also perfect for TFSA accounts, which are most suitable for long-term investment strategies.

This criterion makes Canadian National Railway (TSX: CNR) (NYSE: CNI) one of the top TSX shares for TSFA investors. As the largest railroad company in Canada, CNR has the largest market share in an almost impenetrable industry. CNR has paid dividends every year since 1996 and generally increases dividend payments from year to year.

Over the past four years, CNR has increased dividends by 33%. The company currently has a 4.82% dividend yield, with a payment ratio of 23%, which should bode well for income-oriented investors and those looking for dividend growth shares to be included in their TFSA. Let's consider two more reasons why CNR is a good investment option.

CNR is not appreciated

There is a good reason to think that CNR is currently underappreciated. The company's current P / E is 12.85, which is lower than the TSX average. CNR stock is also cheaper than its main competitor in Canada, Canadian Pacific Railway.

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

CNR runs like a well-oiled machine

CNR's recent earnings report is encouraging. The company posted an increase in revenue, operations and net income, and earnings per share. CNR also produces more efficient profits. Corporate capital returns have increased by 13% over the past five years, while net profit margins have increased by 16% during the same period.

While CNR has always been regarded as one of the most efficient railroad companies, the company experienced several problems at the beginning of the year. Increased demand caused the CNR network to become congested, causing some dissatisfied customers and a decline in their share prices.

CNR promised to deal with this problem, and increase capital expenditure to $ 3.2 billion, which is a record for the company. CNR also employs 400 train conductors during the first quarter only.

CNR's efforts to get back on track are appreciated. The company's second quarter income was very good, and its stock price recovered from the first quarter decline. While CNR did not escape the fluctuating stock market, seeing companies respond appropriately to a bit of the crisis as CNR did was an encouraging sign for investors.


CNR has proven its ability to maintain profit growth and increase dividends while fending off unexpected increases in demand and maintaining efficiency at optimal levels. The company is currently undervalued, which means that now is the right time to buy the shares of the giant train. TSFA investors must pay attention.

Stupid contributors Prosper Bakiny does not have a position in the company mentioned. David Gardner owns shares of the Canadian National Railway. Motley Fool owns shares of the Canadian National Railway. Canadian National Railway is a recommendation from Canadian Stock Advisor.

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