For most investors, the key to investing in railroad stocks is the promise of a lifetime of income from dividends from a relatively safe industry. Technologies and fads will come and go, but as long as physical goods need to be transported across North America, then there will be railroads to do it. The industry is the lifeline of the U.S. economy -- so much so that the largest North American railroad (BNSF) is owned by none other than Warren Buffett's Berkshire Hathaway (NYSE: BRK-B).
Traditionally, U.S. railroads operated in a way that suits risk-averse investors looking for the security that comes with buying into businesses with stable market positioning. In addition, if you believe in the long-term prospects for the U.S. economy (as Buffett does), then you probably also believe in prospects for the railroad industry.
All that being said, there is a significant transformation going on in the U.S. railroad industry at the moment. This transformation is creating some short-term stock volatility but should enhance its long-term earnings (and dividend) growth prospects, and that's great news for investors.