Inflation Is Heading to 3.5%: Yet These 2 Canadian Stocks Can Raise Prices and Keep Their Customers

Inflation is heading toward 3.5% in Canada. See how two TSX stocks, CN Rail and Enbridge, pass on higher costs, keep customers and protect their dividends.

Aditya Raghunath

Author Bio Aditya Raghunath is a financial writer and equity researcher who has spent more than a decade exploring investing and personal finance. Recognizing how complex financial markets can feel to everyday investors, he turned to equity research and financial journalism to help readers make informed decisions through clear, data-driven analysis. His work has been featured on financial platforms including Benzinga, Barchart, TIKR, and TheStreet.com. Aditya focuses on helping investors identify resilient businesses with durable competitive advantages, strong cash flows, and the potential to compound wealth over the long term. Outside of financial research, Aditya enjoys travelling with his family, exploring new cultures, and following global economic developments. Education Master's degree in Finance and Marketing Areas of Expertise Canadian and U.S. equities, growth and value stocks, dividend investing, dividend sustainability, portfolio strategy, asset allocation, exchange-traded funds (ETFs), long-term compounding, macroeconomic trends, interest rates, inflation, and sector rotation. Social Media Profiles LinkedIn Favorite Investment Quote "The stock market is a device for transferring money from the impatient to the patient." — Warren Buffett

Published November 2, 10:00 am EST

Canadians do not need a spreadsheet to know that prices are on the rise. They notice these trends at the pump and the grocery checkout.

Statistics Canada reported that consumer prices rose 3.1% year over year in September, up from 3.0% in August. On October 28, the Bank of Canada raised its policy rate by a quarter point to 2.50%, its first hike since July 2023.

The central bank also expects inflation to reach about 3.5% by the end of 2026. Moreover, the regulator does not see a return to its 2% target until mid-2028.

Given this macro backdrop, let’s see which companies are well positioned to pass higher costs to customers.

A worker gives a business presentation. — Source: Getty Images

Why 3.5% inflation matters for Canadian investors

The Bank of Canada says inflation excluding gasoline was 2.2% in September, and the core measure remains close to 2%.

However, the central bank says high fuel prices are lifting production and transportation costs, which have been primarily absorbed by businesses.

Notably, companies that do not enjoy pricing power have seen profit margins shrink over the last six months.

Here are two Canadian stocks that should perform well even during an inflationary environment.

Canadian National Railway turns higher fuel costs into growth

In Q3 2026, higher diesel prices raised fuel costs for Canadian National Railway (TSX: CNR) by $235 million year over year.

However, sales rose 15% to $4.8 billion while revenue per revenue ton mile, the price of moving one ton of freight one mile, climbed 10% to $0.07. CN credits fuel surcharges and rate increases to top-line growth as volumes rose 4%.

The railroad giant reported adjusted earnings per share of $2.16, an increase of 18%. The adjusted operating ratio, which shows how much of each revenue dollar goes to running the railway, improved to 61%.

Most of the revenue gain was tied to fuel surcharges, which recover higher diesel costs from customers. This lifts revenue and expenses together, which impacts profitability too. If we adjust for fuel costs, the operating ratio would be lower at 60.4%. However, higher fuel prices added about $0.14 to earnings per share.

Canadian National Railway reported a free cash flow of $2.9 billion over the last nine months, an increase of 25% year over year. Analysts project FCF to expand from $3.4 billion in 2025 to $4.9 billion in 2028.

If CNR stock is priced at 23 times forward FCF, below the 10-year average of 28 times, it could gain 12% over the next 12 months, after adjusting for dividends.

Enbridge writes inflation protection into its contracts

Enbridge (TSX: ENB) is among the largest energy infrastructure companies in North America, which offers a yield of over 5% in November 2026.

Enbridge’s Mainline crude oil tolling settlement runs through 2028. Tolls for operating, administration, and power costs adjust with U.S. consumer prices and power indices.

Roughly 70% of Mainline deliveries fall under that deal, and new projects, such as Bay Runner Twin, rest on long-term take-or-pay contracts.

In Q2 2026, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) rose to $4.8 billion from $4.6 billion. Enbridge reaffirmed 2026 guidance of $20.2 billion to $20.8 billion, while its secured project backlog grew to about $41 billion.

CEO Greg Ebel made the pitch on the July 31 call. “Consistency remains a defining characteristic of our company,” he said.

Enbridge lifted its dividend payout by 3% to $0.97 per quarter, its 31st straight annual increase. Analysts forecast distributable cash flow per share to increase to $6.80 in 2030, which should translate to further dividend hikes.

The Foolish takeaway

Neither stock is risk-free. For instance, the performance of CN stock is tied to freight volumes. Management expects tougher grain comparisons in 2027, and its labour agreement with the Teamsters Canada Rail Conference expires at the end of the year.

Enbridge’s debt-to-EBITDA ratio ended the second quarter at 5.1 times, above its 4.5 to 5.0 times target. Chief Financial Officer Pat Murray says currency moves explain the gap, but he expects the ratio to stay near the top of the range.