Optimism on trade negotiations between the United States and China is providing a boost to some unloved market sectors in the TSX. Investors with a contrarian investing style can still find discounted Canadian stocks for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
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Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) trades near $44 per share at the time of writing compared to the 2025 low of around $35, but it is still down 15% in the past year.
The recent move higher is due to a rebound in oil prices. West Texas Intermediate (WTI) oil trades near US$63 per barrel at the time of writing compared to US$57 last week. Oil is still way off the 12-month high above US$80, but markets are starting to bet on a better economic outlook for the United States and China. The two countries are the largest users of oil and have been in a heated trade battle amid rising tariffs.
News that there will be a 90-day pause in tariffs is giving oil traders hope that a reasonable deal can be negotiated to spare the two countries and the global economy from sliding into a recession.
CNRL recently reported solid first-quarter (Q1) 2025 results despite the challenging environment. Production at the oil sands assets hit a record level in the quarter, which helped offset lower prices. The company is also benefitting from a revenue boost from its US$6.5 billion purchase of Chevron’s Canadian operations late last year.
Net debt dropped $1.4 billion in the quarter compared to the end of 2024. CNRL continues to buy back shares and has already raised the dividend by 4% in 2025. This follows two increases in 2024. The board hiked the dividend in each of the past 25 years. Investors who buy CNQ stock at the current level can get a dividend yield of 5.3%.
Canadian National Railway
Canadian National Railway (TSX: CNR) trades near $147 per share compared to a recent low near $130. The stock is still down from the 12-month high of around $175.
CN ran into a series of issues in 2024 that put pressure on revenue growth and drove up expenses. Strikes at both CN and ports disrupted operations. Wildfires in Alberta also delayed cargo shipments. As a result, volumes were not as high as anticipated last year, and efficiency took a hit. This is largely why the share price slid through most of 2024.
In 2025, the extension of the pullback is due to uncertainty around the impact of tariffs. A recession in the United States and Canada would put a dent in demand for CN’s services. The positive news on trade talks between China and the United States is providing some hope that a deal between the U.S. and Canada could occur sooner than expected.
CN’s 20,000-mile rail network runs from the Pacific to the Atlantic in Canada and down through the United States to the Gulf Coast. If a recession can be avoided, the company could hit its earnings growth targets for the year. CN has increased its dividend in each of the past 25 years. The stock currently provides a dividend yield of 2.4%.
The bottom line
CNRL and CN are industry leaders with good track records of dividend growth. If you have some cash to put to work, these stocks deserve to be on your radar.
