Given their importance to the Canadian economy, we feel all investors will benefit from owning at least one—if not both—of Canada’s two main railways: CN Rail and CP Rail.

CN and CP tend to leapfrog each other in terms of investor favour. For example, CN has access to more ocean ports, which helps it gain from rising international trade. On the other hand, CP’s higher exposure to grain, potash and other commodities should spur its earnings as prices for these commodities rebound.

Meantime, both companies continue to benefit from their strong focus on improving efficiency and cutting costs. That puts them in a strong position to handle factors outside of their control, such as the recent wildfires near Fort McMurray.

CANADIAN NATIONAL RAILWAY CO. $88 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 770.8 million; Market cap: $67.8 billion; Price-to-sales ratio: 5.6; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest railway. Its 32,200-kilometre network stretches across the country, and reaches the U.S. Midwest and Gulf Coast.

In 2015, intermodal traffic (containers that travel by rail, ship and truck) accounted for 24% of CN’s revenue. That was followed by: petroleum and chemicals, 21%; grain and fertilizers, 17%; forest products, 15%; metals and minerals, 12%; automotive products, 6%; and coal, 5%.

The company’s revenue jumped 39.7%, from $9.0 billion in 2011 to $12.6 billion in 2015. However, producers of crude oil, coal, iron ore and other commodities are shipping less in response to lower commodity prices. As a result, CN’s revenue for 2016 will likely dip slightly to $12.1 billion.

Earnings rose 63.2%, from $2.2 billion in 2011 to $3.6 billion in 2016. The company is an aggressive buyer of its own shares. As a result, earnings per share soared 83.5%, from $2.42 to $4.44.

CN is an efficiency leader

A strong focus on efficiency is a big reason for CN’s higher earnings. It continues to benefit from recent investments in new trains and terminals; they have sped up deliveries and loading times.

In the quarter ended June 30, 2016, its operating ratio improved to 54.5% from 56.4% a year earlier. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.)

CN recently increased its capacity at ports in Mobile, Alabama, and New Orleans. These improvements will help the company take advantage of the expansion of the Panama Canal. That project has made it easier for ships from Asia to reach the Gulf of Mexico and bypass congested ports on the U.S. West Coast.

In 2016, the company will likely spend $2.75 billion on new equipment and other upgrades. That’s up slightly from $2.71 billion in 2015.

CN’s strong balance sheet will continue to support these investments. As of June 30, 2016, its long-term debt was $9.1 billion, or a low 13% of its market cap. It also held cash of $160 million.

The company gets 80% of its revenue from the U.S., cross-border traffic and overseas clients, so it gains from the lower Canadian dollar. CN’s projected earnings will probably rise from $4.47 a share in 2016 to $5.06 in 2017. The stock trades at 17.4 times the 2017 estimate.

The $1.50 dividend yields 1.7%. The company has increased its dividend each year since 1995.

CN Rail is a buy.

CANADIAN PACIFIC RAILWAY LTD. $201 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 147.8 million; Market cap: $29.7 billion; Price-to-sales ratio: 4.6; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight over a 22,000-kilometre rail network between Montreal and Vancouver, as well as to hubs in the U.S. Midwest and Northeast.

Commodities, such as grain, coal and fertilizers, accounted for 44% of CP’s 2015 revenue. That was followed by merchandise (including consumer and automotive products), 36%, and intermodal (containers that travel by rail, ship and truck), 20%.

In 2012, a prominent U.S.-based activist investor installed former CN chief executive Hunter Harrison as CP’s new CEO. Mr. Harrison implemented a major plan to improve CP’s efficiency. Better service also helped raise its revenue by 29.7%, from $5.2 billion in 2011 to $6.7 billion in 2015.

Thanks to lower costs, CP’s earnings soared 202.0%, from $538 million in 2011 to $1.6 billion in 2015. With fewer shares outstanding, earnings per share jumped 220.6%, from $3.15 to $10.10.

The Fort McMurray wildfires forced producers of oil and other commodities to cut their production; as a result, CP’s operating ratio worsened to 62.0% in the latest quarter from 60.9% a year earlier. However, the company expects to lower its operating ratio to around 55% by the end of 2016.

As of June 30, 2016, CP’s long-term debt was $8.4 billion, or a moderate 28% of its market cap. It also held cash of $92 million.

Higher dividend, new buyback plan

The company recently raised its dividend by 42.9%. The new annual rate of $2.00 a share yields 1.0%. In addition, the company plans to buy back as many as 6.9 million of its shares (about 5% of the total outstanding) over the next year.

CP’s earnings per share will probably rise from a projected $10.88 in 2016 to $12.71 in 2017. The stock trades at 15.8 times the 2017 estimate.

CP Rail is a buy.