This Dividend’s Growth Potential Is Seriously Underrated

When it comes to dividend stocks, there’s a lot more to look for than just the upfront yield, especially if you’re in it for the long run. Undoubtedly, dividend growth might come a distant second to the upfront yield, especially for those who need passive income sooner rather than later. And while a higher yielder can still grow its payout steadily over time, I think that younger investors who don’t rely on dividend payments should prioritize dividend growth a bit more, perhaps more than the upfront yield.

In any case, there are some dividend stocks out there that have high yields as well as generous, predictable dividend-growth trajectories. And in this piece, we’ll look at two dividend growth stars that I think investors might wish to check out on the way down. As you may know, yields tend to move higher as share prices fall.

And if we’re talking about a well-covered, growing payout, perhaps there is an opportunity to lock in a historically “swollen” dividend yield at a low price. Of course, investors should evaluate the path forward and the potential for the payout to grow further.

Is the company in a tougher financial shape after a steep descent, and as a result, will its dividend growth be on the lower end of the historical range moving forward?

It’s tough to tell, but either way, if you’re a fan of the fundamentals and view transitory headwinds as weighing down shares of a said dividend payer, it might be time to step in, especially if you’ve got an investment horizon that’s long enough to allow a firm enough time to stage a turnaround.

CN Rail

It’s hard to believe that CN Rail (TSX:CNR) managed to finish 2025 down by 7.5% when the TSX Index rose more than 27%. Undoubtedly, sticking with the market over the railway was a winning move for 2025. But will that continue to be the case in the new year, as the rails look to get back on track despite macro headwinds, tariffs, and other disruptions? Though it’s too soon to tell, I like CN Rail’s chances at outdoing the rest of the market in 2026.

In a way, it’s an attractively valued catch-up trade that might be able to turn a corner, even if tariffs continue to weigh. Today, CNR stock is in a two-year bear market slump, currently off close to 25% from its peak. It’s been a painful, drawn-out decline, and while the downside momentum has slowed in the past five months or so, investors may wish to be careful when bottom-fishing for the name, especially if 2026 ends up being another year without catalysts.

With a nice 2.61% dividend yield, a mere 18.44 times trailing price-to-earnings (P/E) multiple, a 0.90 beta (meaning slightly less volatility than the TSX), and a bit of newfound momentum since the depths of November (shares up around 6% since the lows of November 2025), CNR stock looks to be a great dividend grower in the bargain bin.

So, should you start the new year off with a fresh position in the name? If you like the yield, the dividend-growth potential, and are hopeful for the future of trade between Canada and the U.S., it might finally be time to buy.

The post This Dividend’s Growth Potential Is Seriously Underrated appeared first on The Motley Fool Canada.

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See the 15 Stocks #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of November 17th, 2025

More reading

• A Softer Loonie Means Gains for These Exporter Stocks
• It’s Time To Buy 1 Canadian Stock That Hasn’t Been This Affordable in Years
• The Best Canadian Stocks to Buy and Hold Forever in a TFSA
• These Are Some of the Top Dividend Stocks for Canadians in 2026
• Before the Clock Strikes Midnight on 2025 – TSX Transportation & Logistics Stocks to Buy

Fool contributor Joey Frenette has positions in Canadian National Railway. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.