Canadian investors are searching for attractive TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on income and total returns.
The TSX is near a record high, but some top Canadian dividend stocks have not participated in the rally and could be ready for a rebound in 2026 and the following years.
Canadian National Railway Company
Canadian National Railway Company (TSX:CNR) has been a great investment for shareholders for most of the past 30 years, dating back to the company’s initial IPO as a public firm. In the past 20 months, however, the stock has gone off the rails a bit.
CN trades near $130 per share at the time of writing, down about 17% over the past year and well off the $180 it reached in early 2024 before going into an extended pullback.
The issues last year centred around labour disputes at CN and the ports it serves, as well as disruptions caused by wildfires in Alberta. Customers switched to alternative ports, largely in the U.S., to transport their cargo. This reduced anticipated revenue growth in 2024, and the delays drove up expenses while impacting operating efficiency. As a result, CN’s adjusted earnings in 2024 came in lower than the previous year.
Management initially had an optimistic outlook for 2025, providing guidance of 10% to 15% growth in adjusted diluted earnings per share (EPS). The positive mood continued into the spring, despite the ramp-up of U.S. tariffs. As it became more evident that a trade deal between the U.S. and Canada could take a while to finalize, CN reduced its earnings expectations. The company now expects to deliver adjusted diluted EPS growth of less than 10% in 2025.
Risks
CN connects ports on the Atlantic and Pacific coasts of Canada to the Gulf Coast in the United States. Tariffs on aluminum, automobiles, forestry products, and finished goods from Canada and other countries are having a negative impact on demand for CN’s services.
The walk back on guidance shouldn’t be a surprise, but it has an impact on confidence in the management team’s ability to provide an accurate outlook for earnings, which can be a headwind for the share price. Negotiations between Canada and the U.S. appear to be stalled, so investors should brace for more turbulence over the coming months.
The longer the U.S. tariffs remain in place, the more likely it is that inflation will start to rise south of the border. This could lead to a recession, especially if companies start cutting jobs to preserve cash flow amid a slowdown in consumption.
Analysts are also weighing the impact of the planned merger between two major American railways that will potentially create a seamless east-west rail route in the country.
Upside
CN is arguably a contrarian pick in the current market conditions. That being said, the business remains very profitable, and trade agreements between the U.S. and Canada, along with other major trading partners, will eventually get settled. When businesses finally have clarity on their costs, demand for CN’s services should increase.
In the meantime, investors can buy CNR at a discount and pick up a decent 2.7% dividend yield. The board has increased the dividend annually for the past 29 years, and CN is using excess cash to buy back stock while the share price is depressed. This benefits shareholders over the long haul.
If you have some cash to put to work in a buy-and-hold portfolio, this stock deserves to be on your radar.
