10 Best Railroad Stocks To Buy Now
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, even in America. According to the Association of American Railroads, every year, freight trains move an astonishing 1.7 billion tons of goods in the U.S. alone.
Clearly, railroads are critical to the American economy — and they can be profitable to investors as well. 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, as 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:
- Wabtec (WAB)
- CSX (CSX)
- Union Pacific (UNP)
- Norfolk Southern (NSC)
- Canadian National Railway (CNI)
- Canadian Pacific Kansas City (CP)
- The Greenbrier Companies (GBX)
- Trinity Industries (TRN)
- FreightCar America (RAIL)
- Rail Vision (RVSN)
1. Wabtec (WAB)
Westinghouse Air Brake Technologies Corp. doesn’t run a railroad, but it does provide essential products and services to keep that industry rolling. In addition to its aftermarket services, the company, also known as Wabtec, also builds locomotives. WAB doesn’t pay a very high dividend, with a current yield of 0.68%. However, analysts have a consensus “buy” rating on the stock, with an average price target one year out of $112.50, implying a gain of about 12%.
2. CSX (CSX)
CSX is a relative newcomer in 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 $14.9 billion in revenues in 2022 alone. While most analysts are favorable toward the rail industry overall, CSX is one of the few companies with a consensus “strong buy” rating from analysts. The company currently pays a relatively modest 1.44% dividend.
3. Union Pacific (UNP)
Union Pacific is one of the old stalwarts among the 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 have a consensus “buy” rating on Union Pacific, with a one-year price target about 10% above current levels. The company pays a solid 2.6% dividend as well.
4. Norfolk Southern (NSC)
Norfolk Southern is a steady grower of both its earnings and its dividend. A very newsworthy derailment and an appearance of its CEO before Congress combined to drag down shares in early 2023, and this might afford a good entry point into the shares for long-term investors. Shares remain down about 15% year to date, but analysts still have a consensus “buy” rating on the stock, with an average 12-month price target of $241.55.
5. Canadian National Railway (CNI)
Canadian National Railway has been a slow but steady performer, posting a 62% gain over the past five years. The company’s 1.91% dividend yield helps support shares, which are favored by analysts who have a consensus “buy” rating. If you’re looking for rail covering Canada from coast to coast, along with mid-America, Canadian National Railway could be of interest. Shares could be volatile heading into the company’s next earnings release on April 24.
6. Canadian Pacific Kansas City (CP)
As the name implies, Canadian Pacific Railway is the smaller sister to Canadian National Railway, with revenue about half of its larger sibling in 2022. However, in terms of stock performance, Canadian Pacific Railway has flipped the script, roughly doubling the return of Canadian National Railway over the past five years. Part of the company’s name comes from its southern terminus in middle America, at Kansas City, Missouri. Analysts are bullish on the company, issuing a “strong buy” rating and a price target about 15% above current levels.
7. The Greenbrier Companies (GBX)
The Greenbrier Companies stock pays a substantial dividend, with a current yield of 3.67%. Analysts are bullish on the company’s prospects also, with a consensus “buy” rating and a price target of $37.75, 28% above current levels. Greenbrier is one of the world’s leading companies in railcar manufacturing, leasing, management and maintenance services, with 2022 revenues of $2.98 billion. The stock has run into some tough sledding recently as it has digested huge gains of 120% in 2020 and 26% in 2021, dropping 27% in 2022 and 12% YTD in 2023.
8. Trinity Industries (TRN)
Trinity Industries provides North American railcar products and services under the trade name TrinityRail. Its two main business divisions are railcar leasing and management services and rail products. The company pays a strong dividend of 4.30% and has the favor of analysts, who have a collective “buy” rating on the company. Shares have returned 46% over the past three years.
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 just over $3 and paying no dividend, FreightCar America must be considered a speculative stock. This can be evidenced by the stock’s 78% drop over the past five years. But for traders, the stock also offers some pop, as it jumped 84.39% in 2020 and an additional 53.11% in 2021. The few analysts rating the stock consider it a “hold,” but the 12-month average price target is nearly 50% above current levels.
10. Rail Vision (RVSN)
Rail Vision Ltd. is another speculative microcap play on the railroad industry, with a market cap of just $20 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 $1.28 per share as of April 18, Rail Vision is a gamble, but if its technology hits, the company could scale quickly and become a big winner.
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.
Data is accurate as of April 18, 2023, and is subject to change. Information on analyst ratings was sourced from Nasdaq.
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- CSX. 2023. "CSX Corp. Announces Fourth Quarter and Full Year 2022 Results."
- Bloomberg. 2023. "Norfolk Southern’s Stock Drop After Ohio Derailment Looks Overdone."
- Zacks. 2023. "Is a Beat in Store for Canadian National's (CNI) Q1 Earnings?"
- The Greenbrier Companies. 2022. "Greenbrier Reports Fourth Quarter and Fiscal Year 2022 Results."
