1 dividend growth star Perfect for a TFSA

With all the talk of questionable valuations and the relative lack of market corrections, it’s certainly tempting to sit on your hands and keep your latest 2024 TFSA (Tax-Free Savings Account) contributions in high-interest savings. As for investment ideas, maybe put them on hold until the next inevitable 10-20% market decline finally hits.

In fact, we didn’t have a big one in 2024, and while there’s a good chance one could be on the cards for 2025, there’s also a chance those waiting in cash could be stuck without a market correction for to make it work for another year.

In fact, valuations have risen quite a bit, but that alone may not be enough to push stocks into some sort of correction. Further, the Trump presidency appears to have produced a wave of retail enthusiasm. Despite higher stock prices, investors seem more than willing to pay an above-average valuation multiple to get into some of the US markets’ hottest names. Whether that is a red flag for value investors remains to be seen.

Here in Canada, many names are heating up, but with a greater abundance of offers and dividends, I still think there are opportunities to grab a stock at reasonable prices right now.

Don’t wait for a fix. Invest and be ready to react should that happen.

Even if a correction should begin in the days and weeks after you buy, you can always add a weakness position. Furthermore, I think an argument can be made that the following names could be dealt relatively less damage in the event of a painful, broader market pullback.

Remember, just because a market is overdue for a correction doesn’t mean it will be even more overdue in the new year if no crisis has a chance to reveal itself. Naturally, when a stock is heating up, the next pullback can be made much more violent once a crisis event finally occurs.

In any case, I think it makes sense to consider buying some of the interesting names TSX index before it can heat up further and valuations get that much higher than they are now, perhaps on the back of bullish new drivers in the new year.

CN railway

CN railway (TSX:CNR) stands out as a terrific bargain buy as it trades at 18.8 times forward price-to-earnings (P/E), with a yield still close to 2.2%. In fact, CN Rail has an expansive network that makes it virtually untouchable from potential rivals on the transportation scene.

Despite persistent headwinds, I view CNR stock as a highly undervalued buy compared to its best peer, CPKC or CP rail (TSX:CP), which could face a drastic valuation on the back of potential Trump tariffs.

Either way, I’d much rather be in CNR stock at a significant discount than CPKC, especially if investors are still overvaluing and overvaluing CPKC’s US-Canada-Mexico network. I think they are.

Either way, CNR stock stands out as the relatively safest bet as the firm takes steps to increase efficiency ahead of what could be a comeback year of sorts. Of course, tariffs will still take some wind out of CN’s back. But with lower expectations and relatively less cross-border exposure than CPKC, I’d argue that CNR stock is the better and safer bet for new TFSA investors.