The world looks like it’s coming to an end for energy companies, as the West Texas Intermediate (WTI) oil price is absurdly low at US$22 per barrel at writing.
The problem is that we have low energy prices coupled with an oil glut and dramatically lower demand due to the coronavirus pandemic.
However, the North American energy infrastructure leader has proven it has strong resilience against low energy prices. While Enbridge has dealt with low oil prices multiple times before, it increased its dividend through thick and thin.
Amid stock market crash 2020, big buy signal in Enbridge stock
This stock market crash must have brought Enbridge stock to a level that’s absurdly cheap so as to attract massive insider buying.
In the first quarter so far, 10 insiders bought shares in ENB stock from the TSX and NYSE markets. Insiders bought, in total, more than $1.7 million worth of shares.
Moreover, their average cost, for this massive insider buying, was $45.80 per share at writing. The median cost was $48.88 per share across 24 transactions.
Insider buying is seen as a big positive of the stock in question, as there’s only one reason for insiders to buy — they think the stock is worth much more.
Right now, you can buy Enbridge at a discount of 19% or 24%, respectively, from the average and median prices that insiders recently bought the dividend stock at.
If this much insider buying is not a big buy signal for investors like you and me who’ve been watching the dividend stock, I don’t know what is!
Notably, one insider, Enbridge Chief Legal Officer and Executive Vice President Robert Ross Rooney was responsible for buying 62% or over $1 million of the stock.
Rooney strategically stretched the purchases across five transactions to net an average price of $43.95 per share at writing.
Stock market crash 2020 doesn’t look like it will end anytime soon, however. So, it would be in investors’ best interests to average into their positions over time.
Although insiders are bullish on the stock, the short-term stock price movements are controlled by the emotional market rather than not the long-term fundamentals of the strong company.
Stock market crash 2020: Why Enbridge remains a safe dividend stock
The stock market crash of 2020 is scarier than the other crashes because it’s a flash crash with no bottom in sight. The backdrop is the COVID-19 pandemic that countries around the world are fighting. In the meantime, the pandemic is bringing global economies to a halt.
Take a deep breath and rest easy with Enbridge stock in your portfolio.
Although the outlook of the energy environment looks gloomy, let’s not forget that nearly half of Enbridge’s EBITDA is from natural gas transmission, distribution, and storage, and power and other assets. These are necessity products and services.
Additionally, there is a high level of defensiveness in Enbridge’s EBITDA, of which 98% of which is backed by long-term contracts and 95% are from investment-grade counterparties. Its cash flow therefore has little commodity price risk and is relatively stable.
Furthermore, the company highlighted that its top 20 customers, which are 90% refiners and integrated producers, represent 86% of its liquids pipeline revenue.
The Foolish bottom line
The stock market crash has pulled down Enbridge stock to a basement bargain price! This price is meaningfully lower than the massive insider buying of $1.7 million worth of Enbridge stock in February and March so far.
This is a big buy signal!
Right now, you can buy Enbridge at a tremendous discount for a dividend yield of about 9%. What are you waiting for?
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