Making Money

The U.S. and Canadian stock markets made a lower high earlier this month. That’s a bearish indicator. Another stock market crash may just be around the corner. 

Source: Stockcharts with author annotation. Canadian stock market made a lower high in June 2020. The U.S. stock market’s chart is simila

Should you wait or buy stocks now? 

Generally, if you’re considering a stock that pays no dividend, you can aim to have more patience in your entry point.

If it’s a juicy dividend stock, you might consider buying some shares if you find it to be a good value, as you’ll get periodic returns from dividend income. However, if you’ve already got a sizable position, you might wait for a super attractive entry point before buying more. 

In March, we added to our position in Enbridge (TSX:ENB)(NYSE:ENB) below CAD$35 per share, intending to hold it for the long term. However, when we saw the 50-day simple moving average was acting as resistance in May, we took substantial profit at the CAD$45 level, which was an appreciation of 30% from when we last bought. 

Source: Stockcharts with author annotation. Enbridge stock chart in June 2020.

We started nibbling on the high-yield dividend stock again as ENB stock has dipped about 10% from the CAD$45 level. We get an impressive 8% yield from the new shares, which is a nice passive income.

We like ENB as a dividend stock. So, we didn’t sell out of our position. However, in this tough market, we decided to take a hybrid approach by using a portion of the position for short-term trades, while holding the remaining shares for dividend income. We nibbled here as it started to be attractive. Do you have some holdings that may work well with this hybrid strategy?

More on Enbridge stock

Year over year, Enbridge’s Q1 adjusted EBITDA was essentially flat, while distributable cash flow was down 2%. However, it does expect some impact from the COVID-19 pandemic due to economic contraction and lower energy demand. This will be reflected in subsequent quarters.

The dividend stock dipped on Friday because of the Michigan court order to temporarily shut down Enbridge’s Line 5. This could lead to a temporary 5% EBITDA loss

As a North American energy infrastructure leader, Enbridge is a relatively defensive energy stock for dividend income. 

Investor takeaway

You probably have a list of stocks that you’re interested in buying. As the U.S. and Canadian stock markets appear to head south again, it’s a good time to update your price target ranges. Also, decide roughly how much you will buy at each price range. Plan ahead to prevent getting swayed by emotion and buying too much.

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Disclosure: As of writing, we own shares of TSX:ENB.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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