Stock market corrections are not always a bad thing, as many new investors might believe. Stock markets are cyclical, meaning they go up and down routinely. It isn’t a matter of if stock markets will crash, it is a matter of when. The more seasoned investors don’t worry too much about downturns because the pullbacks present unique opportunities for them.
Yes, there’s a risk of even the most prominent TSX stocks experiencing downturns during harsh economic conditions. However, high-quality Canadian stocks from blue-chip companies have historically persevered through these times. Identifying and investing in companies capable of emerging stronger on the other side while continuing to deliver returns is the key to success with investing in downturns.
To this end, I will discuss a duo of Canadian dividend stocks that can be excellent holdings to consider adding to your self-directed portfolio.
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Toronto-Dominion Bank
Toronto-Dominion Bank (TSX:TD) is a giant in the Canadian banking sector. The $146.66 billion market-cap bank is one of the Big Six Canadian banks, a tier of financial services companies operating at a different level than the rest of the industry. Bank stocks saw significant declines amid the aggressive interest rate hikes in 2022 and 2023. However, the Bank of Canada and the U.S. Federal Reserve started enacting rate cuts in 2024. Lower borrowing costs improved business for banks and led to a resurgence.
However, TD Bank remained under pressure due to regulatory issues in its U.S. banking operations. Regulators fined the bank over US$3 billion and put a cap on its U.S. assets as penalties. The company is now under new leadership and is reevaluating its approach to growth in the U.S. market. As of this writing, TD stock trades for $83.80 per share and boasts a 5.01% dividend yield.
Canadian National Railway
Canadian National Railway (TSX:CNR) is the biggest company in the Canadian transportation sector. In fact, it boasts the largest railway network in North America. The $85.72 billion market-cap railway company has a network spanning 19,600 miles that connects from one coast to the other, from Chicago to the Gulf of Mexico. It is a leading company in an industry with a next-to-impossible barrier to entry.
2025 has been filled with pullbacks for the stock due to the uncertainty surrounding the impact of tariffs between the U.S. and Canada. The trade war can have far-reaching consequences for the economies in Canada and the U.S., which can reflect on the performance of CNR stock due to potential changes in demand for its services.
However, reasonable trade deals in the coming months can result in a significant revival for the railway stock that transports over $250 billion worth of cargo annually. As of this writing, CNR stock trades for $136.65 per share and boasts a 2.60% dividend yield.
Foolish takeaway
TD stock and CNR stock have faced their share of challenges through the decades but showed resilience through them.
After the change in leadership, TD Bank is working to create a new strategy for more business growth and continue improving shareholder value.
Near-term volatility might lead to more downturns in share prices for CNR stock. However, picking up its shares at current levels might pay off well in the long run.
