Canadian dividend investors are on the hunt for top TSX stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan portfolios focused on generating income and long-term capital gains.
The TSX sits near its record high and many stocks are trading at elevated valuations, but investors can still find some attractive picks.
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Canadian National Railway
Canadian National Railway (TSX:CNR) trades near $157 per share at the time of writing. The stock is up 16% in 2026, but still sits below the $179 it fetched a little over two years ago.
Canadian National Railway ran into some heavy headwinds in 2024 that hurt profits. The company, as well as some key ports it services, faced disruptions due to labour strikes. Wildfires in Alberta that year also interrupted rail traffic. The shutdowns forced customers to find alternative routes for shipping their products, primarily through ports in the United States. In the end, CN’s adjusted diluted earnings per share (EPS) dipped about 5% in 2024 compared to the previous year.
Management hoped 2025 would be a rebound year. Initial guidance for 2025 anticipated adjusted diluted EPS growth in the 10% to 15% range. Unfortunately, the U.S. launched its tariff battles with Canada and global trading partners. CN was forced to abandon its guidance, as a result. In the end, CN delivered adjusted diluted EPS growth of 7% in 2025. Management said the U.S. tariffs hurt operations to the tune of $350 million last year.
Risks
The bounce in the share price so far this year might be a surprise to investors. Tariffs pressures remain in place and negotiations on the renewal of the Canada-U.S.-Mexico Agreement (CUSMA) are likely to go beyond the July 1 deadline and could be difficult.
As such, CN is unlikely to get any near-term relief on the tariff challenges that are impacting its business. Management’s guidance for 2026 is roughly in line with 2025 results.
Negative news and public bickering between the U.S. and Canada, regarding CUSMA, could trigger new weakness in the share price in the coming weeks and through the summer.
Soaring energy prices are expected to drive up inflation beyond the gas pump in the second half of this year and into 2027. An economic slowdown could be on the way if oil prices remain high for too long. This would impact demand for CN’s services.
Finally, the proposed merger in the United States between Union Pacific and Norfolk Southern is putting added uncertainty on the rail industry. If approved, the merger would create an American rail giant with tracks connecting 100 ports and running from the East Coast to the West Coast of the United States. CN’s American routes run south from Canada to the American Gulf Coast, so analysts are trying to figure out what the net impact would actually be for CN.
Upside
Bargain hunters moved into the stock this year on the anticipation of a conclusion to the trade negotiations between Canada and the United States. As soon as a deal is announced, CN’s share price should get a boost due to the removal of the tariff uncertainty for its customers.
CN continues to be very profitable, even in the current market conditions. Management is using excess cash to buy back stock and the board increased the dividend for the 30th consecutive year.
Rising demand for Canadian grain, coal, fertilizer, and energy are helping offset weakness in CN’s other segments. This trend could continue for some time due to the war disruption in Ukraine and the Middle East.
The bottom line
Investors might want to start nibbling near the current price and look to add to the position on any further weakness. Buying CN stock on large pullbacks has historically proven to be a profitable move for patient investors.
