The market correction in some sectors is giving contrarian investors an opportunity to buy good TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
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Canadian National Railway
Canadian National Railway (TSX:CNR) operates roughly 20,000 route miles of tracks that cross Canada from the Pacific to the Atlantic and run down through the United States to the Gulf Coast. The company moves 300 million tons of cargo every year, ranging from crude oil, coal, and cars to fertilizer, forestry products, and finished goods.
The company’s rail network is vital to the smooth operation of the American and Canadian economies.
CN’s share price has been on a downward trend for the past year. The 2024 decline is attributed to disruptions caused by labour disputes at both CN and ports. Wildfires in Alberta also impacted operations last summer. Customers had to find other options to move products during the shutdowns, including shipping through ports in the United States.
The overall impact showed up in CN’s full-year results. Revenue was effectively flat compared to 2023, and earnings slipped 5% due to higher costs associated with the various disruptions to operations.
In 2025, the continued decline in the share price is likely due to concerns that trade battles between the United States and much of the world will cause a recession in the U.S., as well as in Canada. This would put pressure on demand for CN’s services.
On the upside, CN’s Q1 2025 results were pretty good, and management maintained guidance for adjusted diluted earnings per share (EPS) growth of 10% to 15% this year. The board raised the dividend by 5% for 2025. This is the 25th consecutive annual dividend increase. CN is also buying back up to 20 million shares under the current repurchase plan.
At this point, most of the negative sentiment might already be priced into the stock. Investors can now get a 2.6% dividend yield from CNR.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is down 25% in the past 12 months. Falling oil prices are to blame for most of the pain. West Texas Intermediate (WTI) oil trades near $58 per share at the time of writing compared to more than US$83 in July last year. Even at the current price, however, CNRL is still generating good profits.
CNRL’s strong balance sheet and diverse asset portfolio enable the company to take advantage of volatility in the energy market. The company has a strong track record of making large strategic acquisitions when prices decline and reaps the rewards when the market rebounds. CNRL can quickly shift capital to assets where it gets the best returns as market prices change. Natural gas prices, for example, are higher than where they were through most of the past two years.
Investors who buy CNQ stock at the current level can get a dividend yield of 6%. The board has increased the distribution for 25 consecutive years, including two hikes in 2024 and one already in 2025.
The bottom line on top TSX stocks
CN and CNRL are good examples of industry leaders with great track records of dividend growth. If you have some cash to put to work in a contrarian portfolio, these stocks deserve to be on your radar.
