The TSX recently hit a record high, but some top Canadian dividend stocks missed the party. Contrarian investors with a buy-and-hold strategy are wondering which dividend-growth stocks might be undervalued right now and good to add to a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on long-term total returns.
Canadian National Railway
Canadian National Railway (TSX:CNR) is down 14% in the last 12 months. The stock trades near $145 per share at the time of writing and was as high as $180 at one point in 2024.
The pullback through most of 2024 occurred as CN faced numerous disruptions to its operations. Labour strikes at both CN and major ports caused shipment delays and forced some customers to seek out alternative transportation for their cargo. Wildfires in Alberta last summer caused additional issues. The combined delays resulted in reduced efficiency across the entire network, drove up expenses, and led to lower-than-expected revenue. By the end of 2024, CN managed to squeak out a small increase in revenue compared to 2023, but adjusted earnings slipped as a result of elevated expenses.
The story so far in 2025 has been uncertainty around U.S. tariffs. CN operates 20,000 route-miles of tracks that cross Canada from the Pacific to the Atlantic and down through the United States to the Gulf Coast. It moves 300 million tons of cargo per year, including cars, coal, crude oil, grain, fertilizer, forestry products, and finished goods.
Tariffs on China have reduced shipments of cargo destined for the United States. Car companies are slashing shifts or halting production altogether on some vehicles. Investors are concerned that a trade war will push the American and Canadian economies into a serious recession. If that turns out to be the case, there will be an impact on demand for CN’s services.
On the upside, most economists are currently predicting a mild economic slump, with a solid recovery expected once trade deals get sorted out between the U.S. and its major trading partners. CN is providing guidance for adjusted earnings growth of 10% to 15% this year. Assuming management is correct, the stock is likely oversold today.
CN raised its dividend for 2025, marking the 25th consecutive year of dividend increases. The company is also buying back up to 20 million shares under the current repurchase program to take advantage of the slump in the share price.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) has also increased its dividend in each of the past 25 years. This is impressive for a business that relies on commodity prices to determine its profit margins. CNRL is best known for its diversified oil production, which includes oil sands, conventional heavy oil, conventional light oil, and offshore oil assets. The company is also a major Canadian natural gas producer.
Oil prices have been down in the past year due to weak demand from China and higher production from non-OPEC members, including Canada and the United States. Analysts expect the oil market to remain under pressure through 2025 and into next year. That being said, CNRL remains very profitable at current oil prices and is increasing production. It also remains an active buyer of strategic assets to boost revenue and build reserves.
Natural gas prices are higher than they were for most of last year, helping offset the margin hit on the oil side of the business. As such, the drop in the share price might be overdone. CNRL is down nearly 18% in the past year.
Investors who buy CNQ stock at the current price can get a dividend yield of 5.5%, so you get paid well to wait for the rebound.
The bottom line
Near-term volatility is expected, but CN and CNRL are top TSX dividend stocks that trade at discounted prices and should continue to raise their distributions at a steady pace. If you have some cash to put to work, these stocks deserve to be on your radar.
