Railroads are the backbone of North American freight transportation, moving everything from grain and consumer goods to chemicals and automobiles across more than 135,000 route miles of privately owned track. US freight rail traffic rose 1.5% in 2025, according to the Association of American Railroads, but the industry faces uncertainty from trade policy, a subdued manufacturing sector and the long shadow of the East Palestine derailment. Here’s what investors should know.
What are railroad stocks?
Railroad stocks are shares of companies that operate freight or passenger rail networks. In North America, the industry is dominated by seven Class I freight railroads — the largest category, defined by the Surface Transportation Board as railroads with annual operating revenue above a set threshold (currently around $1 billion). These companies own and maintain their own track infrastructure, unlike trucking companies that use public roads, which gives them a structural cost advantage for long-haul, high-volume freight.
Railroad companies generate revenue from several sources:
Freight carload. Transporting bulk commodities like grain, coal, chemicals, metals, lumber and automotive products in individual railcars or unit trains.
Intermodal. Moving shipping containers and truck trailers on rail between terminals, where they’re transferred to trucks for final delivery. Intermodal is closely tied to consumer spending and import volumes.
Ancillary services. Car leasing, switching, storage and logistics services that supplement core freight operations.
How to invest in railroad stocks
You can invest in railroad stocks by buying shares of individual companies or purchasing a transportation ETF. Here’s how to get started:
Choose a stock trading platform. You have plenty to choose from, so be sure to compare your options to find the one that works best for you.
Open your account. Be ready with your ID, Social Security number and bank account information.
Fund your account. You’ll need to transfer money to your brokerage account before you can start investing. Some platforms let you start with as little as $1.
Search for stocks. Look up railroad stocks by ticker symbol or use a stock screener to filter the Industrials sector by the Railroads sub-industry.
Place an order. Once you’ve found an investment you want, specify how much of it you wish to purchase and submit your order.
Monitor your investments. Track the performance of your portfolio by logging on to your account.
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The North American freight railroad industry is concentrated among a small number of large companies. Here are the major publicly traded railroads and a key rail equipment supplier.
The largest publicly traded US railroad by market cap. Operates roughly 32,000 route miles across 23 western states. Strong dividend track record and active share repurchase program.
Operates approximately 20,000 route miles across 26 eastern states, the District of Columbia and parts of Canada. A major intermodal carrier with deep port connections on the East Coast.
Eastern railroad serving 22 states. Agreed to a $310 million DOJ settlement following the February 2023 East Palestine, Ohio derailment. Undergoing a safety and operational overhaul under new leadership.
Formed in April 2023 when Canadian Pacific completed its $31 billion acquisition of Kansas City Southern. The only single-line railroad connecting Canada, the US and Mexico across 20,000 miles.
Canadian National Railway
CNI
Class I railroad
Operates approximately 20,000 route miles spanning Canada coast-to-coast and into the US Gulf Coast. Carries a diverse freight mix including grain, petroleum, forest products and automotive.
Wabtec Corporation
WAB
Rail equipment
The world’s largest provider of locomotives, freight car components, signaling systems and digital rail technology. A pick-and-shovel play on the railroad industry’s capital spending cycle.
Why invest in railroad stocks?
Railroads are deeply tied to the real economy. When goods are being produced, shipped and consumed, freight volumes rise and railroad revenue grows with them. This makes railroad stocks a way to invest in the broader industrial cycle without picking individual manufacturers or commodity producers.
Several characteristics make railroads attractive to long-term investors. They operate on privately owned infrastructure that would cost hundreds of billions of dollars to replicate, creating massive barriers to entry. The North American Class I railroad industry is effectively an oligopoly — just seven companies control the vast majority of freight rail traffic, limiting competitive threats. And railroads are significantly more fuel-efficient than trucks for long-haul freight, moving one ton of cargo nearly 500 miles on a single gallon of diesel, which gives them a structural cost advantage.
Railroads also tend to be strong dividend payers and active share repurchasers. Union Pacific, for example, has returned billions to shareholders through buybacks and has raised its dividend for more than a decade. For income-oriented investors, Class I railroads offer a combination of yield and capital discipline that is uncommon in the industrials sector.
According to the AAR, Class I railroads invested $26.8 billion in capital expenditures and maintenance in 2023 alone, and the rail industry contributed $25.1 billion in tax revenues at local, state and federal levels. International trade is a major driver, with rail directly responsible for 38% of carloads and 37% of freight rail revenue.
Precision scheduled railroading
Since the late 2010s, most Class I railroads have adopted precision scheduled railroading (PSR), an operating strategy focused on running longer, fewer trains on more consistent schedules. The goal is to reduce the operating ratio — operating expenses as a percentage of revenue — which is the key profitability metric investors use to evaluate railroad efficiency.
PSR has delivered significant margin improvements across the industry. But it has also drawn criticism for reducing workforce levels, deferring maintenance and contributing to service disruptions. The 2023 East Palestine derailment brought these concerns into sharp public focus, and regulators have since increased scrutiny of railroad safety practices. Investors should understand the trade-off: PSR can drive impressive operating ratios, but the long-term consequences of cutting too deep on labor and maintenance are a real risk.
The East Palestine derailment
On February 3, 2023, a Norfolk Southern freight train carrying hazardous materials derailed in East Palestine, Ohio, triggering fires, evacuations and the release of toxic chemicals including vinyl chloride. The NTSB attributed the derailment to a failed and overheated wheel bearing that was not detected in time.
The fallout was significant. Norfolk Southern agreed to a $310 million DOJ settlement in February 2025, replaced its CEO, and estimates it will spend over $1 billion total on cleanup, safety improvements and community remediation. The disaster also triggered congressional hearings and federal safety advisories aimed at the broader freight rail industry, including recommendations for improved hot bearing detector spacing and hazardous materials car standards.
For investors, East Palestine is a reminder that railroad companies carry meaningful environmental and safety liability. Norfolk Southern’s stock underperformed its peers for more than a year following the derailment.
What about BNSF Railway?
BNSF Railway is the largest US freight railroad by revenue, operating roughly 32,500 route miles across 28 western and southern states. However, BNSF is wholly owned by Berkshire Hathaway (BRK.A / BRK.B) and does not trade as a standalone stock. Warren Buffett acquired BNSF in 2010 for approximately $44 billion, calling it an “all-in wager on the economic future of the United States.” Investors who want exposure to BNSF can only get it by owning Berkshire Hathaway shares.
Transportation ETFs with railroad exposure
There are no ETFs that invest exclusively in railroad stocks, but several transportation-focused ETFs hold significant railroad positions alongside trucking, airline and logistics companies.
iShares Transportation Average ETF (IYT). Tracks the Dow Jones Transportation Average, which includes Union Pacific, CSX, Norfolk Southern and Canadian Pacific Kansas City among its largest holdings.
SPDR S&P Transportation ETF (XTN). An equal-weighted ETF tracking a broader basket of US transportation companies across rail, trucking, airlines and logistics.
Key metrics for evaluating railroad stocks
Railroad companies report several industry-specific metrics that investors should track alongside standard financial ratios:
Operating ratio. Operating expenses divided by revenue, expressed as a percentage. A lower operating ratio means higher profitability. Class I railroads typically target operating ratios in the mid-50s to low-60s percent range. This is the single most watched metric in railroad investing.
Revenue ton-miles. The total weight of freight multiplied by the distance it travels. This measures the actual volume of work the railroad is performing.
Train velocity. How fast trains are moving across the network, measured in miles per hour. Faster trains generally indicate better network fluidity and operational efficiency.
Terminal dwell time. How long railcars sit idle at terminals. Lower dwell times signal more efficient operations and faster asset turnover.
Carload and intermodal volumes. Reported weekly by the AAR, these figures provide a near-real-time read on freight demand and economic activity.
Bottom line
Railroad stocks offer investors exposure to the physical movement of the American economy through a small group of companies with structural advantages that are nearly impossible to replicate. But the industry’s cyclical nature, regulatory exposure and the operational trade-offs of precision scheduled railroading mean that careful analysis of operating metrics matters more here than in most sectors. Compare platform options before you open an account.
Frequently asked questions
Yes. All of the major Class I railroad stocks pay dividends. Union Pacific has one of the longest dividend growth streaks in the industrials sector. CSX, Norfolk Southern, Canadian Pacific Kansas City and Canadian National also pay regular dividends. Railroad stocks are often held in income-oriented portfolios because of their consistent capital return programs.
Precision scheduled railroading (PSR) is an operating strategy adopted by most Class I railroads since the late 2010s. It focuses on running fewer, longer trains on fixed schedules to reduce costs and improve asset utilization. PSR has significantly lowered operating ratios across the industry, but critics argue it has contributed to workforce reductions, deferred maintenance and service issues.
No. BNSF Railway is wholly owned by Berkshire Hathaway (BRK.A / BRK.B) and does not trade as a separate stock. The only way to get exposure to BNSF is by purchasing Berkshire Hathaway shares, though BNSF represents just one part of Berkshire's diversified conglomerate.
On February 3, 2023, a Norfolk Southern freight train derailed in East Palestine, Ohio, releasing hazardous materials including vinyl chloride. The NTSB found the cause was a failed wheel bearing. Norfolk Southern agreed to a $310 million DOJ settlement in February 2025, replaced its CEO and estimates total costs will exceed $1 billion. The disaster intensified federal scrutiny of railroad safety practices across the industry.
The operating ratio is a railroad's operating expenses divided by its revenue, expressed as a percentage. A lower ratio means the railroad keeps more of each dollar earned as profit. Class I railroads typically target ratios in the mid-50s to low-60s percent range. It is the single most important profitability metric for evaluating railroad stocks and is closely watched by analysts and investors.
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Javier Simon is a freelance finance writer at Finder and a certified educator in personal finance (CEPF).
He’s featured on NerdWallet, Bankrate, Yahoo Finance and Fox Business, where he’s shared his expertise on personal finance topics, such as investing, retirement planning, taxes, budgeting and savings.
He has also covered breaking news, such as student loan forgiveness initiatives, the housing market and inflation’s impact on consumers’ wallets.
His passion is turning complex financial concepts into actionable content that can help people improve their financial lives.
Javier holds a bachelor’s degree in multimedia journalism from SUNY Plattsburgh.
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