Contrarian investors are searching for discounted TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios.
In the current market conditions, where soaring oil prices and tariff uncertainty risk triggering a global recession, it makes sense to consider stocks that can ride out a downturn and offer good upside potential when the storm passes.
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Canadian National Railway
Canadian National Railway Company (TSX: CNR) trades for $151 per share at the time of writing compared to a high near $180 two years ago.
The stock has actually been on an upward, although choppy, trend since August 2025. Bargain hunters started to move into CNR when it dipped below $130, buying on the hopes that Canada and the United States would resolve their trade dispute.
Near-term risks
The anticipated trade deal didn’t materialize before the end of the year and negotiations on key sticking points, including metals and forestry products, are now tied to the broader discussions connected to extension or termination of the Canada-U.S.-Mexico Agreement (CUSMA).
CN said U.S. tariffs hurt its revenue to the tune of $350 million in 2025. Businesses are only ordering essential materials and are holding off commitments to large investments until there is more clarity on the tariff situation. CUSMA negotiations could extend well beyond the July 1st deadline.
Soaring oil prices provide another near-term headwind for CN. Trains run on diesel fuel, and use a lot of it, when moving cargo across the country. The jump in expenses often gets passed on to clients, but that might not be the case as CN has to remain competitive. Depending on the route, however, the surge in fuel costs can also potentially drive some business from trucking companies to the railways.
A proposed US$85 billion merger in the United States between Union Pacific and Norfolk Southern will shake up the North American rail sector, if it gets approved. The deal would create a single rail network connecting the east and west coasts of the U.S., serving more than 40 states and 100 ports. Analysts are trying to determine how the deal would ultimately impact the other railways, including CN. The Canadian rail operator has lines in the United States that run north from the U.S. Gulf Coast to Canada, where they then connect to ports on the Canadian Atlantic and Pacific coasts.
Opportunity
CN remains a very profitable business, despite all the headwinds the company currently faces. At some point, a trade agreement will be put in place that gives businesses clarity on tariffs. This should unlock pent-up investment and would ultimately boost demand for CN’s cross-border services that currently account for roughly a third of volume.
Canada’s current efforts to boost international trade to offset reliance on the United States could trigger a surge in exports from Canadian ports in the coming years. CN would benefit in that scenario.
In the meantime, CN continues to make capital investments to drive efficiency improvements and tap growth opportunities along the existing network. Management is using excess cash flow to buy back shares, while also maintaining dividend growth. CN has increased the dividend in each of the past 30 years.
The bottom line
A dip back to the 12-month low is certainly possible in the coming months, so investors need to be patient. That being said, most of the negative news is likely already reflected in the share price today. Additional downside would be an opportunity to boost the position. If you have some cash to put to work in a contrarian portfolio, CNR deserves to be on your radar.
