Investors who missed the big rally in the TSX this year are wondering which Canadian stocks might still be undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
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Canadian National Railway
Canadian National Railway (TSX:CNR) investors have endured a rare rough couple of years. The stock currently trades near $131 compared to $180 in early 2024.
The pullback is due to several factors. Labour disputes at both CN and key ports in 2024 disrupted operations. Wildfires in Alberta that summer added to the delays. As a result, CN saw expenses rise, efficiency drop, and revenue growth effectively stagnate last year. In the end, CN’s adjusted earnings dipped compared to 2023 and revenue only increased about 1%.
2025 started out on an upbeat note, but things changed over the course of the first half of the year. CN initially expected a nice rebound to occur with anticipated growth of 10% to 15% in adjusted diluted earnings per share (EPS). Management held the line on the guidance until the summer, but had to step back as it became obvious that tariffs imposed by the United States on Canada and other trading partners would remain in place for some time.
CN operates a rail network that connects the Pacific and Atlantic coasts of Canada with the Gulf Coast in the United States. The company transports coal, cars, crude oil, forestry products, metals, grain, and finished goods to and from the two countries. Tariffs have impacted demand for CN’s services, resulting in reduced guidance for the year. In the Q3 2025 earnings report, CN confirmed it now expects adjusted diluted EPS to increase by less than 10% in 2025 compared to last year.
Near-term headwinds are expected, but a deal between Canada and the United States will eventually get done. Tariffs are starting to drive up inflation in the United States, which should put pressure on the White House to speed up a conclusion of trade negotiations with major trade partners before a recession occurs. As soon as there is clarity on tariff rates, CN should start to rebound.
CN remains very profitable and had increased the dividend for 29 consecutive years. The company is also taking advantage of the depressed share price to aggressively buy back stock. Investors can currently get a dividend yield of 2.7% from CNR.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) traded as high as $55 in 2024. The stock dipped as low as $36 in April this year. Investors who bought the tariff-induced plunge are already sitting on some decent gains. CNQ trades for close to $47 at the time of writing. More upside could be on the way.
CNRL remains very profitable at current prices and is still delivering higher profits. The company says its WTI breakeven price is US$40 to US$45 per barrel. Management is adept at taking advantage of the strong balance sheet to make strategic acquisitions to drive revenue and earnings growth alongside the successful drilling program.
Expansion of export capacity for both oil and natural gas is on the way for Canadian oil and gas producers. This will benefit CNRL in the coming years.
The board increased the dividend in each of the past 25 years. Investors who buy CNQ stock at the current level can get a dividend yield of 5%, so you get paid well to wait for oil prices to recover.
The bottom line
Canadian National Railway and CNRL trade at discounted prices and have great track records of delivering dividend growth. If you have some cash to put to work in a buy-and-hold dividend portfolio, these stocks deserve to be on your radar.
