Canadian National Railway (TSX:CNR) is down considerably over the past year. Contrarian investors with a buy-and-hold strategy 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 stock price
CN trades near $130 per share at the time of writing, compared to $180 at the peak last year. The stock is now back to the four-year low it breached during the market rout in April.
CN operates approximately 20,000 route miles of railway tracks connecting ports on the Atlantic and Pacific coasts of Canada to the Gulf Coast in the United States. The network is strategically important for ensuring the smooth operation of the Canadian and U.S. economies. CN moves about 300 million tons of cargo every year. This includes everything from forestry products, fertilizer, grain, and finished goods, to coal, cars, and crude oil.
CN generates revenue in Canada and the United States. The extensive American operations provide Canadian investors with a good way to get exposure to growth in the United States through a large Canadian company. When the U.S. dollar rises against the Canadian dollar, the American cash flow helps boost profits on the higher conversion rates.
CN continues to make investments to improve efficiency and drive revenue growth, even in the current uncertain market conditions. The 2025 capital program is about $3.4 billion.
CN’s share price slid in 2024 as a result of disruptions caused by labour strikes at CN and the ports it serves. Wildfires in Alberta also impacted traffic along the network. The combination of these events forced some customers to find alternative transport to get their cargo moved to clients. Costs also increased, putting pressure on profits. In the end, CN delivered 2024 revenue that came in just above 2023, while earnings fell about 5% as a result of higher expenses.
The story in 2025 is all about tariffs. Investors are concerned that trade negotiations between the United States and Canada, as well as other key American trading partners, could drag on for longer than expected. Tariffs could cause a recession in the United States and Canada, as well as across the globe. This would have a negative impact on demand for CN’s services.
In its first-quarter (Q1) 2025 earnings report, CN expected to deliver adjusted diluted earnings per share (EPS) growth of 10% to 15% in 2025 compared to 2024. In the Q2 report, however, CN just reduced the outlook, citing ongoing uncertainty due to the tariff threats. Management now expects adjusted diluted EPS to rise by less than 10% in 2025. The change in the guidance is the reason the stock is retesting a multi-year low.
Upside potential
The market might be pricing in the worst-case scenario right now. Trade agreements between the U.S. and its neighbours, as well as China, could emerge in the coming weeks. The U.S. government doesn’t want to cause an economic meltdown in the country. Even if the negotiations take longer and some near-term tariff pain occurs, the deals will eventually get done, and businesses will adjust.
As soon as there is clarity on the tariff rates, CN should see demand for its services stabilize. That could put a new tailwind behind the stock.
Dividends and share buybacks
CN raised the dividend by 5% for 2025. This is the 29th consecutive annual dividend increase. CN is also buying back up to 20 million shares under the latest stock-repurchase plan. Investors who buy CNR stock at the current level can get a dividend yield of 2.7%.
Time to buy CN stock?
Near-term volatility is expected, but CN already looks cheap at this price. If you have some cash to put to work in a buy-and-hold portfolio, this stock deserves to be on your radar. Buying CN on big pullbacks has historically proven to be a profitable move for patient investors.
