Canadian railroad stocks such as Canadian National Railway (TSX:CNR) and Canadian Pacific Kansas City (TSX:CP) have delivered market-beating returns to long-term shareholders. Since January 2024, CNR stock has returned 1,500% in dividend-adjusted gains. Comparatively, Canadian Pacific Kansas City has generated 2,000% for investors in this period.
While past returns don’t matter much to current or future investors, let’s see which blue-chip dividend stock is a better buy right now.
The dividend stocks are navigating a challenging macro environment
Canadian National Railway and Canadian Pacific Kansas City are navigating a challenging freight environment with markedly different strategies, creating distinct investment profiles for each company.
CN Rail is taking a defensive posture amid weak volumes.
- The company cut $75 million in costs by reducing management positions while placing over 700 train crew members on furlough.
- These moves reflect CN’s cautious outlook, as management expects the freight recession that started in 2022 to persist into 2026.
- The railroad giant reduced its 2026 capital spending by $550 million to $2.8 billion as it shifts from capacity expansion to cost control.
- While volumes rose 1% in the first nine months of 2025, CN improved its operating ratio by 170 basis points in Q3.
- Its operating ratio in the September quarter stood at 61.4%, which demonstrated strong execution on controllable factors.
CPKC presents a growth-focused alternative. The company is leading the industry with 5% revenue ton mile growth this year, driven largely by merger synergies rather than economic conditions.
Management expects to reach $1.1 billion in revenue synergies by year-end, approaching their $1.5 billion target ahead of schedule. The unique network connecting Canada, the United States, and Mexico has enabled CPKC to create new markets and services, particularly in domestic intermodal, where Chicago-to-Mexico volumes surged 48% year-over-year.
The investment cases diverge on leverage and shareholder returns.
- CN maintains a conservative balance sheet targeting 2.5 times leverage. This provides flexibility for potential acquisition opportunities if the proposed Union Pacific-Norfolk Southern merger triggers industry consolidation.
- The company repurchased eight million shares for over $1 billion in Q3, which suggests that the stock is undervalued, according to the management team.
CPKC operates with higher leverage, around 2.8 times, but recently completed a 4% buyback of outstanding shares and raised its dividend by 20%. Management projects continued double-digit earnings growth and expects to deliver mid-single-digit volume growth in 2026 despite macro headwinds.
What is the average stock price target for CNR and CP?
Analysts tracking CP stock forecast adjusted earnings to grow at an annual rate of almost 13% through 2029. Given consensus price targets, CP stock trades at a 22% discount in January 2026.
Analysts tracking CNR stock forecast adjusted earnings to grow at an annual rate of almost 10% through 2029. Given consensus price targets, the dividend stock trades at a 13% discount in January 2026.
CN stock is a top investment for investors seeking defensive quality with upside optionality from industry consolidation. Those prioritizing growth and willing to accept higher leverage should favour CPKC stock, which benefits from unique cross-border synergies that competitors cannot replicate.
The current environment makes CN the safer choice for conservative investors, while CPKC suits those confident in North American trade growth.
