The TSX recently hit a new record high. Investors who missed the big bounce off the tariff pullback are wondering which Canadian stocks are still attractive to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) focused on dividends and long-term total returns.
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Canadian National Railway
Canadian National Railway (TSX:CNR) operates nearly 20,000 route miles of tracks that connect ports on the Pacific and Atlantic coasts of Canada to the Gulf Coast in the United States. The company moves about 300 million tons of cargo every year, including cars, coal, crude oil, grain, fertilizer, forestry products, and finished goods. In short, CN is strategically important to the smooth operation of the Canadian and U.S. economies.
The stock is down about 16% in the past year. Strikes a both CN and key ports interrupted operations in 2024. The company also saw delays caused by wildfires in Alberta. The disruptions reduced efficiency across the network and drove up expenses while forcing some customers to pivot to alternative options, which put a dent in volume growth. By the end of the year, CN reported revenue that was barely above 2023. Adjusted earnings dipped about 5% due to higher costs.
The extension of the pullback in 2025 has more to do with investors worrying that tariffs will cause a recession in the United States and Canada. Shipments heading to the United States from China and other international suppliers are already down as domestic buyers try to navigate the tariffs. Automotive manufacturers in Canada and the U.S. are cutting production or delaying investments until there is more clarity on the tariff situation.
Near-term volatility is expected, but trade deals will eventually get done. CN expects to deliver adjusted earnings per share (EPS) growth this year of 10% to 15% despite the headwinds. The board raised the dividend for the 25th consecutive year, and CN is buying back up to 20 million shares of its common stock under the latest repurchase plan. CNR trades near $147 at the time of writing compared to $180 at one point last year, so there is solid upside potential, and you can collect a 2.4% dividend yield while you wait.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is a giant in the Canadian energy sector with a current market capitalization of nearly $90 billion. The company is known for its extensive oil production assets that include oil sands, conventional heavy oil, conventional light oil, and offshore oil reserves. CNRL is also, however, a major natural gas producer in Western Canada.
West Texas Intermediate (WTI) oil is down from US$80 per barrel last year to the current price near US$61. This is largely the reason CNQ stock is off 17% in the past 12 months. CNRL’s US$6.5 billion purchase of Chevron Canada’s assets late last year could also be a factor. CNRL took on extra debt to get the deal done, which will delay the plan to return 100% of excess cash to shareholders.
That being said, long-term benefits from the deal should outweigh the short-term concerns. CNRL is getting a good revenue boost from the new assets and has added significant reserves. Investors might also be overlooking the strength of natural gas prices right now. This will help offset weaker oil prices. New pipeline access to international buyers could also be on the way in the medium term as Canada looks to pivot from its reliance on the United States.
CNRL raised its dividend in each of the past 25 years. Investors who buy CNQ stock at the current price can get a dividend yield of 5.5%.
The bottom line
Canadian National Railway and CNRL trade at discounted prices and have great track records of dividend growth. If you have some cash to put to work, these stocks deserve to be on your radar.
