10 Best Railroad Stocks To Buy Right Now

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Railroad stocks might seem old-fashioned in a world where technology seemingly dominates everything, but rail transport is still a critically important part of the global supply chain. According to the Association of American Railroads, freight trains move an astonishing 1.7 billion tons of goods yearly in the U.S. alone.

Railroads are critical to the American economy — and can be profitable for investors. In addition to being in constant demand, railroad companies typically pay dividends to investors, making them more defensive and attractive to certain investors.

What Are the Best Railroad Stocks To Buy?

Even the Oracle of Omaha himself, Berkshire Hathaway CEO Warren Buffett, is bullish on railroads. His company completely owns Burlington Northern Santa Fe or BNSF.

Although that’s now a private company under Berkshire’s control, here are 10 railroad stocks that are publicly traded and available to you as an investor:

Methodology

Stocks on this list were chosen for a number of reasons. These include analyst ratings and projections of industry dominance, growth rates, service areas and potential for future outperformance.

Some are more speculative than others and may be better short-term stock options, so be sure to do your own due diligence before jumping into any investments.

1. Wabtec (WAB)

Westinghouse Air Brake Technologies Corp. has been around since 1869, making air brakes that revolutionized the railroad industry by allowing trains to run at higher speeds due to their safety and reliability. The company doesn’t run a railroad, but it provides essential products and services to keep that industry rolling.

In addition to its aftermarket services, Wabtec builds locomotives. WAB doesn’t pay a very high dividend, with a current yield of .41%.

However, while seven of the 13 analysts watching the stock recommend holding, the others rate it a “strong buy” or “buy,” and the consensus price target is $202.78, about 1.4% above the current price.

2. CSX (CSX)

CSX, a relative newcomer to the railroad world, formed in 1980 from the merger of the Chessie System and Seaboard Coast Line Industries.

However, CSX is no small player, pulling in $14.657 billion in revenues in 2023 alone. Analysts are generally bullish on CSX, with 18 out of 27 rating it a “strong buy” or “buy.”

The price target is 7% above current levels. The company currently pays a relatively modest 1.38% dividend.

3. Union Pacific (UNP)

Union Pacific is one of the old stalwarts among rail lines, founded way back in 1862 when President Lincoln signed the Pacific Railway Act.

Since helping to build the transcontinental railway, Union Pacific has been through many of the major ups and downs of American history. Analysts’ ratings are mixed, with over half recommending holding.

Their average price target is about 7% above current levels. The company pays a solid 2.3% dividend.  

4. Norfolk Southern (NSC)

Norfolk Southern is a steady grower of its dividend, which has risen by 9.31% annually over the past five years. The dividend also yields a handsome 2.07%. A newsworthy derailment and an appearance from its CEO before Congress combined to drag down shares in early 2023.

However, that was a good entry point, as they rebounded strongly into 2024.

In recent months, however, the NSC share price has rolled over yet again, and it’s currently up 14.93% year to date in 2024. Analysts still have a consensus “hold” rating on the stock, with an average 12-month price target of $275.59. That’s about 1.4% above current levels.

5. Canadian National Railway (CNI)

If you’re looking for rail covering Canada from coast to coast, along with mid-America, Canadian National Railway could be of interest.

In addition to actual rail transportation, CNI operates various ancillary services, such as equipment provision, customs brokerage, real estate, business development, transloading and distribution and private car storage services.

The company’s 2.29% dividend yield helps support shares, which currently have a consensus “hold” rating. The average 12-month price target on the stock is $127.98, about 15.5% above current levels.

6. Canadian Pacific Kansas City (CP)

Canadian Pacific Kansas City is the other Canadian railway company, but as its name implies, it also owns the Kansas City Railway in America.

Which stock might be better for you depends on your investment outlook. While Canadian National is more profitable than Canadian Pacific, CP is growing much faster.

Analysts are bullish on the company, with 18 out of 26 issuing a “strong buy” or “buy” rating. The price target is 21% above current levels.

7. The Greenbrier Companies (GBX)

The Greenbrier Companies stock pays a solid dividend, with a current yield of 1.86%. Half of the eight analysts watching the stock are bullish, and half are unsure, rating it a “hold.” The average price target is $58.33, 9% below current levels.

Greenbrier is one of the world’s leading companies in railcar manufacturing, leasing, management and maintenance services, with record 2023 revenues of $3.9 billion. The stock has recovered sharply after dropping significantly in the second half of 2023 and is up over 80% in the last year. Analysts estimate 18.70% annual growth over the next five years.

8. Trinity Industries (TRN)

Trinity Industries provides North American railcar products and services under the trade name TrinityRail. Its main business divisions are railcar leasing, management services and rail products.

The company pays a strong dividend of 2.97% and has analysts favor, who have a collective “buy” rating on the company. Shares have returned almost 58% over the past year.

9. FreightCar America (RAIL)

FreightCar America is a more speculative offering than most of the stocks on this list, but for the right investor, it could prove interesting. With a share price of just over $15 and paying no dividend, FreightCar America must be considered a speculative stock. This can be evidenced by the stock’s trading patterns.

It’s up 509.2% over the past year — and popped 84.39% in 2020 and an additional 53.11% in 2021 — but as recently as August, the stock was down nearly 30% over the previous five years. Of the five analysts tracking the stock, one has a “strong buy” but the remainder has a “hold” rating.

Just ahead of the company’s third-quarter earnings release, the average price target is about 21% below current levels.

10. Rail Vision (RVSN)

Rail Vision Ltd. is another speculative microcap play on the railroad industry, with a market cap of just $10.02 million.

Unlike other more direct plays on this list that provide actual rolling stock or operate rail networks, Rail Vision is a technology company. Its systems allow trains to detect and classify objects that may be obstructing or running along tracks from up to 2 kilometers away, in all light and weather conditions.

At $.49 per share as of Nov. 19, Rail Vision is a gamble, but if its technology hits, the company could scale quickly and become a big winner. 

Pros and Cons of Investing In Railroad Stocks

Rail is a major part of the U.S. transportation infrastructure, which suggests railroads and the companies that support them aren’t going anywhere. But that doesn’t mean the industry won’t face challenges in the years ahead.

Pros of Investing In Railroad Stocks

Here are a few reasons why railroad stocks could be a solid, if “boring,” long-term investment.

• Rail Freight is a Vital Part of the U.S. Economy: A good way to understand the benefits of investing in railroad stocks is to look back at Warren Buffett’s 2009 purchase of BNSF. He called the purchase “an all-in wager on the economic future of the United States,” according to Reuters’ reporting at the time.
• The Rail Industry Will Continue To Grow: Railroads carry 40% of long-distance freight volume in the U.S. and are expected to grow 30% by 2040, according to the AAR. To help facilitate that growth, the Federal Railroad Administration invested $1.4 billion in 2023, earmarking funds from President Joe Biden’s 2023 Bipartisan Infrastructure Law for 70 rail improvement projects in 35 states. Unless new railroads pop up in those states, which seems unlikely, existing companies like the ones listed here will reap all the benefits.

Cons of Investing In Railroad Stocks

Despite its importance to the U.S. economy, the rail industry faces some challenges that could affect railroad stocks.

• Rail is a Highly Regulated Industry: The Surface Transportation Board, an independent federal agency created by Congress, has economic regulatory oversight over freight rail. The agency has several proposals the AAR says could reduce investment, increase costs and compromise safety. If so, railroads could suffer as companies adjust to the changes.
• Green Energy Initiatives Could Reduce the Need for Freight Rail: Fossil fuels like oil and coal rely heavily on rail transportation. Green energy could reduce the nation’s reliance on rail freight. For example, even West Virginia, which is heavily reliant on fossil fuels, is seeing major green energy initiatives — including one backed by Warren Buffett.

Alternative Ways To Invest In Railway Stocks

If you don’t have the time, desire or ability to pick your own individual stocks, you can invest in mutual funds or ETFs that buy railway companies instead. These investments can provide you with access to tens or even hundreds of different stocks in a single purchase, all managed by a professional financial services firm.

Although there are no funds that invest exclusively in railroad stocks, there are several good transportation funds and ETFs that also invest in industries like airlines, cargo and other storage, equipment and transportation companies.

Some of the best include the following:

• iShares U.S. Transportation ETF (IYT)
• SPDR S&P Transportation ETF (XTN)
• Fidelity Select Transportation Portfolio (FSRFX)

Are Railroad Stocks a Good Investment?

Railroads may not always be exciting, but they can generate profits — and income — for investors.

As there are many types of rail-related companies, from veteran businesses to speculative newcomers, it’s best to speak with a financial advisor to see if any of these stocks is a good match for your investment objectives and risk tolerance.

Daria Uhlig contributed to the reporting for this article.

Data is accurate as of Nov. 19, 2024, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance.

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