Investors who missed the big rally in the TSX over the past few months are wondering which top Canadian stocks might still be undervalued and good to buy for a self-directed Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
Source: Getty Images
Canadian National Railway
Canadian National Railway (TSX:CNR) trades near $129 at the time of writing. The stock was as high as $180 in 2024 and hasn’t been this low for four years.
Labour disputes and wildfires impacted operations in 2024, resulting in a smaller-than-expected increase in revenue and a drop in adjusted diluted earnings per share compared to 2023. In 2025 the weakness has continued, largely due to uncertainty around the trade negotiations between Canada and the United States, as well as tariffs placed by the U.S. on goods coming from other countries, including China.
CN operates a rail network that connects ports on the Atlantic and Pacific coasts of Canada to the Gulf Coast in the United States. Approximately 300 million tons of cargo travels on CN’s tracks every year. This includes cars, coal, crude oil, fertilizer, forestry products, grain, and finished goods. Businesses are holding back on non-essential purchases until there is clarity on tariffs. Traders are also concerned that tariffs will drive up inflation and cause a recession in the United States, Canada, and the broader global economy. This would have a negative impact on demand for CN’s services.
Recent news of a planned merger between two American railways is also causing some uncertainty. A new wave of consolidation in the North American rail industry could be either positive or negative for CN depending on how the company is positioned once all the dust settles.
Investors should brace for more volatility in the near term, but CN already looks cheap and should be a solid long-term pick. The board raised the dividend in each of the past 29 years, with a 5% increase in 2025. CN is also repurchasing up to 20 million shares this year. Management revised 2025 guidance lower due to the tariff uncertainties, but CN still expects to deliver earnings growth compared to last year.
Buying CNR stock on big pullbacks has historically proven to be a profitable move for patient investors. At the time of writing, investors can get a dividend yield of 2.8%.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) trades near $43.50 at the time of writing compared to $55 at one point in 2024. The oil and natural gas producer is a giant in the Canadian energy patch with a current market capitalization near $90 billion. CNRL’s size and solid balance sheet give it the financial firepower to make large strategic acquisitions to drive growth. For example, the company spent US$6.5 billion in 2024 to buy Chevron’s Canadian assets.
CNRL’s operations are very efficient and management is adept at moving capital around the asset portfolio to take advantage of the best margin opportunities as commodity prices change. The company has oil sands, conventional light and heavy oil, and offshore oil assets, as well as natural gas liquids and natural gas production.
CNRL remains very profitable at current oil prices and continues to boost production through successful drilling programs and acquisitions. The board increased the dividend in each of the past 25 years. Investors who buy CNRL stock at the current price can get a 5.4% dividend yield.
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 self-directed RRSP, these stocks might be undervalued today and deserve to be on your radar.
