1 Magnificent TSX Dividend Stock Down 11% to Buy and Hold for Decades

Contrarian investors are searching for unloved TSX dividend stocks to add to a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on income and total returns.

Buying dividend stocks when they are out of favour takes courage and requires the patience to wait for a turnaround, yet the strategy can provide higher average yields and offers a shot at decent long-term total returns when the stocks recover.

Canadian National Railway

Canadian National Railway (TSX:CNR) trades near $135 per share at the time of writing compared to more than $150 at this time last year and nearly $180 at the peak in 2024.

The past two years have certainly been challenging ones for CN and its investors. In 2024 the company faced disruptions to its operations as a result of labour strikes at both CN and the ports that it serves. In addition, wildfires in Alberta interrupted shipments along its Canadian network. Higher expenses and reduced volumes led to lower year-over-year earnings in 2024.

Management initially hoped 2025 would be a recovery year, but the uncertainty caused by U.S. tariffs forced CN to reduce its original 2025 guidance. The company lowered its target growth for adjusted diluted earnings per share from 10% to 15% to less than 10% for the year. Investors will get the final 2025 results on January 30, 2026.

The 2026 guidance will likely be more cautious than the outlook the company provided a year ago. Trade uncertainty will continue through at least the first half of 2026 as Canada, the United States, and Mexico have a July 1 deadline to decide on the fate of the current Canada-U.S.-Mexico Agreement (CUSMA).

Opportunity

CN remains very profitable, despite the challenges. Management is taking advantage of the depressed share price to buy back stock using excess cash. The company has also maintained its dividend-growth streak which currently sits at 29 years of annual dividend hikes.

Capital investments will continue to help make the company more efficient while boosting revenue on segments where there is additional demand for CN’s services. At some point Canada and the U.S. will sort out a new trade agreement. When that happens, CN’s share price could pick up a tailwind.

Over the long run, the Canadian and American economies will continue to grow. This should lead to rising demand for CN’s services connecting the two countries. At the same time, Canada is working hard to grow its international trade, particularly with Europe and Asia. This could lead to a surge in cargo demand across the domestic routes as shipments move to-and-from Canadian ports.

Risks

A proposed rail merger in the United States between Union Pacific and Norfolk Southern will have a significant impact on the American rail industry if it is approved, as it would create a single east-west coast-to-coast network. CN’s lines run north-south in the United States, but there could be shifts in volumes from customers.

The net impact on CN wouldn’t be known until after the merger is complete and the industry adjusts to the new arrangement. Until there is clarity on the outcome, CN’s share price could face ongoing headwinds.

The bottom line

Near-term volatility is expected and the stock could easily retest the 12-month lows in the coming months. That being said, much of the downside risk is likely already reflected in CN’s share price. Buying CN on significant pullbacks has historically proven to be a savvy move for patient investors.

If you are a contrarian investor with a buy-and-hold strategy, this stock deserves to be on your radar.

The post 1 Magnificent TSX Dividend Stock Down 11% to Buy and Hold for Decades appeared first on The Motley Fool Canada.

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More reading

• Best TSX Stock to Buy Right Now: CN Rail vs. CP Rail?
• 5 Top Stocks With High Dividend Growth to Buy Now
• Better Railway Stock: Canadian National vs Canadian Pacific?
• TFSA: 3 Canadian Stocks to Buy and Hold for the Long Run
• Invest in These 3 Unstoppable Canadian Stocks for the Next Decade

The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.