Canadian National Railway (TSX:CNR) has long been Canada’s economic backbone – and a favourite among dividend-growth investors. But the stock has been under pressure for some time now. Amid lingering global trade tensions, including the fallout from the renewed Trump-era tariff war, shares of CN Rail have fallen more than 20% from their 2024 highs. For long-term investors, that spells opportunity – but not without a hstrategy.
Why the pullback looks like a buy
CNR’s drop has pushed the stock down to the $138 range, giving it a price-to-earnings (P/E) ratio of about 19. That’s roughly an 11% discount to its long-term average valuation. The analyst consensus price target suggests an even steeper discount – closer to 15% – indicating near-term upside potential of about 18% for buyers at current levels.
What’s more, the dividend yield has climbed to over 2.5%, a significant jump from its five-year average of 1.8%. With nearly three decades of consecutive dividend increases under its belt, CN Rail has proven to be both resilient and shareholder-friendly. While the most recent dividend hike came in at a more modest 5%, down from its 10-year average growth rate of 13%, this likely reflects temporary headwinds – not long-term weakness.
Last year, the payout ratio was just 48% of earnings, suggesting the dividend is sustainable and set for continued increases in the years ahead.
How I’d invest $10,000 in CNR stock
Despite the discounted valuation, I wouldn’t rush to invest all $10,000 at once. Timing the market is notoriously difficult, especially in a volatile geopolitical environment. Instead, I’d use a dollar-cost averaging approach to reduce risk and take advantage of any further dips.
For example, I might start investing $1,000 today, then another $1,000 every couple of months to remove any emotion from the process. Another approach would be to layer in buys at technical or percentage-based levels: buy a portion now, then more if the stock drops another 5–7%. This keeps dry powder available while still capturing today’s discounted price.
Once I’m comfortable with the first half of my investment being in place, I’d consider allocating the remaining $5,000 the same way, or even reserving it for other value opportunities that arise in the Canadian stock market.
The long-term case for CN Rail
Despite current macro headwinds, the long-term fundamentals for Canadian National Railway remain rock solid. CN boasts one of the largest and most efficient freight rail networks in North America, connecting major ports on the Atlantic, Pacific, and Gulf coasts. Its operations are critical to transporting a diverse mix of goods and commodities, including automotive, consumer goods, grain, forest products, energy, chemicals, and intermodal containers.
As global trade patterns shift, CN’s strategic geographic reach positions it to adapt – and thrive. If trade with the U.S. softens, Canadian companies will increasingly pivot toward other international markets. CN’s infrastructure is already in place to facilitate that pivot.
In short, with its durable business model, defensive qualities, and a growing dividend, CN Rail remains a blue-chip stock worth owning. With $10,000 in 2025, I’d build my position patiently – but confidently.
