Canadian National Railway (TSX:CNR) is down more than 20% from the 2024 high. Contrarian investors are wondering if CNR stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividend growth and total returns.
Canadian National Railway share price
CN trades near $140 per share at the time of writing, compared to $180 at one point in March last year. The extended pullback over the past 16 months gives investors a chance to buy CNQ on a meaningful dip.
Labour disputes at both CN and key ports, combined with wildfires in Alberta, disrupted operations in 2024. Customers had to find alternative transport to get their cargo to customers, which impacted volumes and revenue. Delays along the rail network drove up costs and hurt efficiency at the company. In the end, CN still managed to deliver a small rise in revenue in 2024 compared to 2023, but earnings slipped due to the jump in expenses.
The weakness in the share price in 2025 is due to investor concerns about the impact of tariffs on the economy in the United States, Canada, and their key trading partners. CN operates roughly 20,000 km of rail lines that connect ports on the Pacific and Atlantic coasts of Canada to the Gulf Coast in the United States. It is a key player in the smooth operation of the North American economy. A recession caused by high tariffs and extended trade uncertainty would be negative for CN due to lower demand for its services.
Upside?
Resolution of the trade negotiations between the United States and Canada would likely drive CN’s share price higher as investors remove the uncertainty discount. Management actually provided an upbeat outlook for 2025 when the company released the first-quarter (Q1) 2025 results. CN expects to deliver adjusted diluted earnings per share (EPS) growth of 10% to 15% in 2025 compared to last year. In Q1, the company saw revenue and operating earnings rise 4% year over year. Diluted EPS came in 8% higher.
CN continues to make investments across its network to improve efficiency and enable growth. The capital program is about $3.4 billion this year, with investments occurring in both Canada and the United States. CN generates significant revenue south of the border, so the stock is a good option for investors to get exposure to the American economy through a top Canadian company.
Dividends and share buybacks
CN has a long history of returning cash to shareholders. The company raised the dividend by 5% for 2025. This is the 29th consecutive annual dividend increase from the board. CN is also buying back up to 20 million common shares under the current stock-repurchase plan.
Risks
The U.S. is threatening to impose higher tariffs on Canada in the coming weeks if there isn’t more progress made on the trade negotiations. If the tariffs go into place and Canada retaliates with reciprocal tariffs while negotiations continue, there could be a new leg to the downside for CN stock in the near term.
Time to buy?
Investors should expect volatility to continue in the short term. A slide back to the 2025 low around $130 per share is certainly possible. That being said, CN already looks cheap. Investors might want to start nibbling near this level and look to add to the position on any further weakness. Patience is required, but buy-and-hold investors should do well with CN at this entry point.
