Mr. Market has officially lost his senses with global markets tanking on China’s retaliatory devaluation of the yuan, causing it to be formally labelled as a currency manipulator by the Trump administration.
Things went from somewhat optimistic to ugly to hideous just over the course of a few days, and while it’s easy to throw in the towel and flock to bonds over the latest threat to the global economy, I think it’s an opportunistic time to pick up shares of quality dividend payers at a nice discount to last week’s prices.
You’re still get the same high-quality companies that traded at a higher price a week or two ago, and you’ll still get paid dividends as per norm. The only difference is that investors have lost their cool when it comes to equities over the rising uncertainties in these times of economic warfare.
While China’s latest response seems horrifying, it’s times like these (as everybody is running to the hills) when it’s a good idea to go against the grain by being greedy, as foolish as it may seem in the heat of the moment.
While the markets continue to exhibit volatility that many of us have never witnessed before in real time, it’s good to have stability in the form of a dividend. And as stock prices continue to retreat, average up your dividend yield by adding to your favourite dividend stocks on the dip.
If you’re going to invest through this “schizophrenic” market, you might as well get paid to do so. Here’s a top pick for your TFSA, as prices fluctuate in a nonsensical fashion over the short term.
Enter Enbridge (TSX:ENB)(NYSE:ENB): a bruised company that’s had its own share of problems.
Over the past few years, the stock has treaded water thanks in part to a sluggish oil market, regulatory hurdles, resistance to new projects, and seemingly endless delays to projects that have already received the “green light.”
It’s tough to be patient as an investor in the former market darling,which is still keen on keeping its dividend promise to investors with double-digit percentage dividend hikes through the next few years in spite of its tighter balance sheet. While Enbridge hasn’t really generated a proportional amount of free cash flow to warrant for such continued dividend hikes, the company remains ridiculously shareholder friendly — perhaps too friendly.
The Line 3 Replacement has hit a few unexpected bumps in the road, but it’s coming, and when it finally comes online, I think management will be quick to announce a new dividend-growth trajectory through the mid-2020s.
At the time of writing, the stock has a 6.8% dividend yield, and as the U.S.-China tit-for-tat spat turns into a horror movie, Enbridge will be trading off in its own world, less dependent on macro news involving geopolitical turmoil than most other stocks.
What does the trade war have to do with Enbridge?
Next to nil. So, I’d treat any further dips in the days ahead as an opportunity to buy an already discounted stock at a bargain-basement price. Everybody seems to be ditching equities as a whole now, and it’s times like these when it’s best to be a buyer.
Stay hungry. Stay Foolish.
