Canadian retirees have quite the tightrope to walk as they seek to balance out growth potential, passive income (in the form of dividends, interest, distributions, and all the sort), as well as safety (lower volatility and defence against economic downturns). Of course, every individual retiree is going to have a different risk tolerance, income needs, and appetite for growth.
In any case, there is one common trait that I think every investor should seek to maximize at all costs: value. Whenever you can pay a dollar to get a dollar and change, investors should look to act. But, of course, it can be tough to tell what’s actual value and what’s a trap disguised as value.
In my view, it’s better to go for a modestly-discounted stock that’s out of favour than to go for the steepest markdowns, especially if you can’t fully grasp why a company is down and what more it’ll take to spark some kind of turnaround. Bottom-fishing isn’t easy, and if you don’t have an appetite for turbulence, perhaps prioritizing quality and reasonable prices could be the winning move over the long term.
Without further ado, here’s one safety stock that I think is defensive with a nice, growing dividend, an underrated longer-term growth profile, and a valuation that’s still not all too outlandish.
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CN Rail stock looks cheap
Enter shares of CN Rail (TSX:CNR), which have been chopping around quite a bit this year, with steep surges and equally vicious drawdowns. Indeed, the stock is starting to get far choppier than the market in 2026. But despite the wild swings, I do view the name as a great comeback play with one of the most durable dividends out there (currently yielding 2.4%). I don’t know about you, but I’d rather get a 2.4% yield with a good shot of averaging dividend growth in the high single-digits (or even low double-digits in good times) over prolonged periods.
Of course, CN Rail is rolling through a rather harsh climate, and dividend growth might not be as generous as it used to be. Still, I think the rail icon is one of the steadier and more boring ways to build wealth over the decades. What’s most enticing is that the rail firm has one of the widest physical economic moats out there, one that AI cannot replicate!
Compared to a utility, you’re getting less yield (at least on average), a higher beta, and far more sensitivity to the state of the economy. Indeed, if we are headed for an AI-induced economic downturn, CNR stock is going to be a rougher ride. But I think it’ll all be worth it for the long-term dividend growth potential and the really depressed price of admission.
The company may be going through some rough times, but with a 19.3 times forward price-to-earnings (P/E), you’re paying a very fair price for a company with pricing power and the ability to bounce back once the economy picks up speed.
Bottom line
You can’t have a booming economy without CN Rail. And with encouraging volumes in the latest quarter, perhaps it’s time to board before the firm becomes more of an optimal operator while headwinds finally look to dissipate. CNR stock might be too choppy for some retirees, but for those who want a good price on a long-time dividend grower while the multiple is reasonable, I’d say it’s a great time to nibble.
