Written by Joey Frenette at The Motley Fool Canada
Investors might find that it’s harder to come by deep-value stocks with sizeable dividends and promising growth prospects. Indeed, quality isn’t as cheap as it used to be, but for investors who are willing to explore the names that aren’t as appreciated or well-known, I do think that there are names out there that can not just pay dividends, but offer a compelling growth runway over the medium term (think the next two years or so).
Either way, the TSX Index is not too far off from its all-time highs, and for value investors, it has become just a bit more challenging to find the deals. But don’t let that deter you from investing today, especially since the broad markets does not seem all that expensive, either. Even in a fair market, there can be relative deals to be had for those willing to put in the extra homework.
In this piece, we’ll check in on one cheap Canadian dividend grower that I think is going for way too cheap and could be a great hold, not just for the next few years, but perhaps the next 10–15 years. Given the dividend growth and the generous upfront yield, perhaps investors won’t feel the need to hit the sell button. After all, if you’ve got a rich source of passive income that keeps giving you a nice raise every year, perhaps selling doesn’t make a lot of sense, even if you’re sitting on a nice gain.
CN Rail stock is moving higher again
Either way, enter shares of CN Rail (TSX:CNR), which has only just started to find its groove alongside the broader railway scene. Indeed, it has been tough to own the rails in recent years, as you watch the rest of the market soar higher. In any case, I still see shares of CN Rail as offering one of the better risk/reward profiles in the market today.
The stock got dragged into a devastating bear market between 2024 and 2025. With a likely bottom now in the books and a nice 12% (or so) gain year to date, I finally think the name is timely enough to pick up. Whether you’re in it for the 2.4% dividend yield or the capital gains, I do think that CN Rail is perhaps one of the most durable dividend growth stocks on the entire Canadian stock market.
The name will not soar overnight as some of the AI stocks have, but it is on the right track (forgive the pun) after that latest quarter. Industry headwinds, while still present, are becoming more bearable. And with the broader industrials looking higher, I do think that CN Rail may very well be ready to rise to the occasion as the next cyclical upswing takes hold.
Bottom line
There have been notable improvements across the board, and as demand trends look to get better with time, I think CNR stock may very well have what it takes to be a leader rather than a laggard. In my view, CNR stock has served its time in the penalty box and is ready to start winning again. At 20.2 times trailing price-to-earnings (P/E), I view the dividend grower as fairly priced and worth holding for life.