ATD:CC - 2 Everlasting Canadian Stocks for Your RRSP
2024-05-28 20:00:00 ET
When it comes to investing, it’s best to take the long-term view. Short-term market fluctuations are unpredictable, but quality companies tend to thrive over long periods of time. That doesn’t mean that just any stock is a good stock if you hold it long enough, though. Many stocks have given investors negative long-term results. In this article, I will explore two everlasting stocks worth holding in your RRSP.
CN Railway
The Canadian National Railway ( TSX:CNR ) is a Canadian railroad stock that ships crude oil, grain, and timber all across North America. One of Canada’s oldest non-bank companies, it has delivered very good returns over the decades, making it an ‘everlasting stock.’ Since January 2010, the stock is up 529% – more when you include dividends. Past returns don’t predict future returns, but many of the characteristics that made CNR successful in the past are still present today. For example, the company is very profitable, with a 56% gross profit margin, 41% operating profit margin, 33% net income margin, and 27% return on equity. All of these numbers are good; the net margin and ROE in particular are both near the upper end of what’s possible.
One thing that CNR has been lacking lately is growth. In 2023, railroad revenue was down across the entire industry. It appears that much of the revenue decline was attributable to fuel surcharges , which declined as 2023 oil prices were lower than those seen in 2022. In 2024, oil prices are creeping upward again, which should have a positive effect on railroads, including CNR.
Unlike the other stock on this list, I actually owned CN Railway stock in the past. Though I eventually sold, I did not sell due to losing faith in the company. Rather, I found other companies that I was more interested in. I still think CNR is worth owning for the long haul.
Alimentation Couche-Tard
Alimentation Couche-Tard Inc ( TSX:ATD ) is a Canadian gas station company that owns the famous Circle K gas station chain. Its stock has performed very well over the last two decades, rising more than 1,000% in that timeframe. The company’s earnings have gone up a lot as well, suggesting that the stock price appreciation is supported by company performance. ATD has the makings of an everlasting stock.
Alimentation Couche-Tard stock is partially a play on energy prices . More than half of the company’s revenue and about 40% of its gross profit come from selling fuel (e.g., gasoline and diesel). Many smart investors think that oil prices will be high in the coming years, so ATD could be one way to get a piece of that action.
The biggest thing Alimentation Couche-Tard has going for it is its smart management. Over the years, they have grown the company by re-investing profits instead of taking on huge amounts of debt. As a result, ATD has only a 1.2 debt-to-equity ratio despite having expanded massively over the years. It is definitely a quality company.
Everlasting stocks: Foolish takeaway
There aren’t very many “everlasting stocks” out there. Most companies have their moment in the sun and then decline. There are exceptions, though. The two stocks on this list may be counted among them.
The post 2 Everlasting Canadian Stocks for Your RRSP appeared first on The Motley Fool Canada .
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy .
2024