Canadian investors who missed the big rally in 2025 are wondering which TSX stocks might still be undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) focused on dividends and total returns.
In the current market environment, it makes sense to look for stocks with long track records of paying steady dividends through a variety of economic conditions.
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Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) trades near $44 per share at the time of writing. The stock was as high as $55 at one point last year.
Weaker oil prices are to blame for the pullback. West Texas Intermediate (WTI) oil trades near US$63 per barrel right now compared to US$80 last year. Rising supply is part of the story as OPEC plans to raise output to recapture some lost market share while countries like Canada and the United States continue to increase production. Traders are also concerned that a potential recession in the United States and additional economic weakness in China could hurt demand growth.
CNRL says its WTI breakeven price is in the US$40-45 per barrel range, so the company is still generating good margins at current oil prices. Oil production is the largest part of the overall business, but CNRL is also a major natural gas producer. Demand for Canadian natural gas is expected to rise in the coming years as liquified natural gas (LNG) export capacity increases. Additional oil export capacity could also be on the way as Canada moves to reduce its dependence on the United States.
CNRL has a strong balance sheet that enables the company to ride out tough times and to make strategic acquisitions to boost production and reserves. The board has increased the dividend annually for the past 25 years. Investors who buy CNQ stock at the current level can get a dividend yield of nearly 5.3%.
Telus
Telus (TSX:T) is another contrarian dividend pick today. The stock trades below $22 at the time of writing compared to $34 back in the spring of 2022.
Soaring interest rates in the second half of 2022 and through much of 2023 hurt the stock as rising interest expenses on variable-rate loans cut into profits and reduced cash available to pay down debt. Borrowing new funds to replace fixed-rate debt coming due has been more expensive than it was during the pandemic. Telus has more than $30 billion in total debt, so the impact of higher rates is meaningful.
Rates dropped in the second half of 2024, but Telus was stuck in a price war with its competitors. The company also took a hit from reduced revenue at its Telus Digital (Telus International) operations.
Looking ahead, things should start to improve. The price war is over, and Telus is taking Telus Digital private. The other subsidiaries, including Telus Health, Telus Agriculture, and Consumer Goods, are performing well and growing. Telus is monetizing non-core assets to pay down debt. At the same time, interest rates are expected to trend lower in 2026.
Telus expects to generate decent free cash flow over the medium term, so the dividend should be safe. Investors who buy Telus at the current level can get a dividend yield of 7.6%.
The bottom line
CNRL and Telus offer good dividend yields that pay you well to wait for a rebound. If you have some cash to put to work, these stocks deserve to be on your radar.
