Canadian National Railway Company (TSX:CNR) and Canadian Natural Resources (TSX:CNQ) are down more than 20% from their 2024 highs. Contrarian investors are wondering if CNR and CNQ are now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) focused on dividend growth and long-term total returns.
Canadian National Railway
CN trades near $136 per share at the time of writing, compared to $180 at one point last year. The stock bounced off the 2025 low of $130 to as high as $150 in May, but has since given back a good chunk of the gain.
The downturn through most of 2024 can be attributed to labour disputes and wildfires that disrupted operations last year. Worker strikes at CN and the ports it serves forced shippers to find alternative routes to get their cargoes to customers. In addition, wildfires in Alberta caused delays along CN’s rail network. The combination of the interruptions drove up expenses and cut into expected revenue levels. For the full year in 2024, CN generated a small increase in revenue compared to 2023, but profits dropped.
In 2025, the continued weakness is due to uncertainty around U.S. tariffs. Investors are waiting for clarity on trade negotiations between the United States and Canada, along with U.S. negotiations with other key trading partners, including China. CN operates roughly 20,000 route miles of tracks connecting ports on the Atlantic and Pacific coasts of Canada to the Gulf Coast in the United States. High U.S. tariffs could trigger a recession in both the United States and Canada, as well as across the globe. This would impact demand for CN’s services.
Headwinds could persist for the stock in the coming months, but trade deals will eventually get done, and businesses will resume placing orders for commodities and finished goods that need to move along CN’s network. In the first-quarter (Q1) 2025 earnings report, CN said it expects to deliver adjusted diluted earnings per share (EPS) growth of 10% to 15% in 2025 compared to last year. Assuming that turns out to be the case, the stock is probably undervalued right now.
CN raised the dividend by 5% for 2025 and has increased the distribution annually for the past 29 years. Investors who buy CN stock at the current price can get a dividend yield of 2.6%.
Canadian Natural Resources
CNRL trades near $42 per share at the time of writing, compared to $55 at the high point in 2024. Falling oil prices are to blame for most of the decline. Investors might also have punished the stock a bit after CNRL spent US$6.5 billion late last year to buy Chevron’s Canadian assets. CNRL took on some extra debt to fund the deal. Energy investors increasingly want companies to reduce debt and return more cash to shareholders rather than pursue aggressive growth.
CNRL will continue to pay down its debt position, and the new assets should be a win for investors over the long run.
CNRL owns a diversified portfolio of energy assets, including oil sands, conventional heavy oil, conventional light oil, offshore oil, natural gas liquids, and natural gas production. Management is adept at shifting capital around the portfolio to get the best margins as commodity prices change. Natural gas, for example, currently trades above its level for most of 2023 and 2024. This helps offset the weakness in the oil market.
CNRL remains very profitable, even at current oil prices. The company already raised the dividend by 4% for 2025, marking the 25th consecutive annual increase. Investors who buy CNQ stock at the current price can get a dividend yield of 5.6%.
The bottom line
CN and CNRL are industry leaders with great track records of dividend growth. If you have some cash to put to work in a TFSA or RRSP, these stocks deserve to be on your radar right now.
