Canadian Nationwide Railway (TSX:CNR) has underperformed the TSX up to now two years. Contrarian buyers are questioning if CN inventory is now oversold and good to purchase for a self-directed Tax-Free Financial savings Account (TFSA) or Registered Retirement Financial savings Plan (RRSP) centered on dividend development and long-term whole returns.

Canadian Nationwide Railway

CNR trades close to $131 per share on the time of writing. The inventory is down 10% in 2025 and is approach off the $180 it fetched at one level final yr.

The decline over the previous yr and a half is because of various causes. In 2024, CN confronted labour disputes at each the corporate and key ports. Disruptions to companies attributable to the shutdowns pressured prospects to seek out different choices for transferring their cargo. CN additionally confronted delays in the summertime of 2024 on account of wildfires in Alberta.

The mix of the interruptions final yr led to greater bills and lower-than-expected income development. The truth is, income got here in simply barely greater than in 2023, and adjusted internet earnings fell.

At first of 2025, CN supplied a extra upbeat outlook. Administration initially anticipated the corporate to ship positive factors in adjusted diluted earnings per share (EPS) of 10% to fifteen% in comparison with 2024. When CN reported the second-quarter (Q2) 2025 earnings outcomes, nonetheless, administration revised the earnings steering decrease. Uncertainty surrounding the impression of tariffs pressured the corporate to scale back expectations for this yr. CN now anticipates development in adjusted diluted EPS to be lower than 10%.

Dangers

Financial headwinds must be anticipated within the close to time period till commerce agreements are finalized between america and key buying and selling companions, together with Canada, Mexico, and China. The longer negotiations drag on, the extra seemingly the financial system is to slip right into a recession as shoppers and companies cut back spending. This is able to be detrimental for CN.

A proposed rail merger in america between Union Pacific (UP) and Norfolk Southern (NS) might additionally shake up the business. The web impression it could have on CN, nonetheless, isn’t clear. CN’s traces run from Canada south to the U.S. Gulf Coast. The UP merger with NS would create a single east-west rail provider. CN has agreements in place with the U.S. rail operators, so these may merely stay in place.

Alternative

CN stays very worthwhile, and buyers ought to see dividends proceed to rise. Shareholders obtained a dividend enhance this yr, and CN is making the most of the low share value to purchase again as much as 20 million shares beneath the present share-repurchase plan. The board raised the distribution in every of the previous 29 years. The present dividend yield is 2.7%.

Capital investments stay on monitor for the yr at $3.4 billion, so administration isn’t pausing the expansion program.

Any information of a commerce deal between the U.S. and Canada, Mexico, or China ought to give the inventory a pleasant enhance. Lengthy-term financial development will drive up demand for CN’s companies.

Time to purchase?

The broader market is due for a pullback, so I wouldn’t again up the truck. Nonetheless, contrarian buyers may need to begin nibbling on CNR at this stage and look so as to add on any further draw back. Endurance is required, however shopping for CN on significant dips has traditionally confirmed to be a savvy transfer.