Don’t Panic! These 2 Stocks Can Stabilize Your Portfolio

Learn how reliable income stocks like Canadian Utilities (TSX:CU) and Enbridge (TSX:ENB) can protect your portfolio during the bear market.

| More on:
Cogs turning against each other

Image source: Getty Images.

Stock market volatility can be scary. But don’t lose your cool! There’s a way to still make money while limiting your downside potential.

The trick is the pick your investments carefully. The two companies below can mitigate your risk without sacrificing long-term upside.

This stock is a Canadian classic

Enbridge (TSX:ENB)(NYSE:ENB) is a Canadian icon. The stock has averaged double-digit annual returns since 1995. The current dividend stands at 7.5%.

If you read the news, you know that Enbridge is a pipeline company. It owns the largest network on the continent. It traffics 25% of North America’s crude oil, plus a huge share of its natural gas.

Pipelines naturally have built-in risk mitigation. That’s because they’re basically monopolies. They cost billions to build, and you rarely need two competing pipelines in the same space. So, once you’re in a certain market, that market is yours.

Enbridge is a particularly good investment if you’re worried about the future. Fossil fuels are being phased out globally, but demand will still persist for several decades, and there’s nothing on the horizon that will supplant pipelines. Plus, these companies charge on volumes, not commodity prices, giving you another cushion against volatility.

What can you expect from Enbridge in 2021? At the minimum, know the 7.5% dividend is secure. Even if capital gains total 0%, you’ll still end up ahead. And if markets tank? The stock price should outperform the market, with reliable cash flows backing up the outsized dividend payment. It’s a win-win.

Want maximum protection?

Want even more protection against a bear market? Canadian Utilities (TSX:CU) is for you. It’s similar to Enbridge, but has an even brighter long-term future. This utility stock is a great pick for any market, especially if you’re worried about volatility.

“Driven by stable dividends and fair capital growth, utility stocks have made a decent fortune for investors in the long term,” explained Fool contributor Vineet Kulkarni. “Another critical advantage of utilities is their low correlation with broader markets. Thus, utilities are generally their preferred choice in uncertain times. That’s why we may see broad market indexes fall 20% amid the recession fears, but utility stocks fall maybe just 10%,” he concluded.

Canadian Utilities is perhaps my favourite stock within the utility space. It recently greenified its generation portfolio to reduce regulatory risk, and takes a heavy rate-regulated approach to improve cash flow visibility. Did I mention the dividend has been raised every year for nearly 50 years? That’s the longest track record in Canadian history!

How to invest now

Energy stocks can be extremely volatile during a market disruption, but as Enbridge and Canadian Utilities prove, you can still find safety in this space. You just need to choose carefully.

If you’re worried, now is the time to prepare for a market correction. That doesn’t mean sell everything and convert to cash. The best path forward is to remain calm and maintain a long-term viewpoint.

With low-volatility stocks like Enbridge and Canadian Utilities, you can remain invested without sacrificing your sleep quality. It really is the best of both worlds.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool owns shares of and recommends Enbridge. Fool contributor Ryan Vanzo has no position in any stocks mentioned.

More on Dividend Stocks

Payday ringed on a calendar
Dividend Stocks

3 Top TSX Passive-Income Stocks That Pay Out Every Month

Here are some of the best TSX stocks for passive monthly income. Investors should explore to see if they're a…

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Remarkably Cheap TSX Stocks to Buy Right Now

These three cheap TSX stocks are some of the best buys on the TSX, and yet their share price is…

Read more »

think thought consider
Dividend Stocks

This Dividend Stock Could Create $1,353 in Passive Income in 2024

This dividend stock can create massive passive income from two sources, so don't miss out before a recovery in 2024!

Read more »

Increasing yield
Dividend Stocks

TFSA Investors: Buy This Top Bank Stock for High-Yielding Dividends

Generate a superior passive-income stream by investing in this high-yielding dividend stock from Canada’s Big Six banks.

Read more »

grow money, wealth build
Dividend Stocks

2 of the Best TSX Dividend Stocks I Plan on Holding Forever

High-yield TSX dividend stocks, such as Enbridge, offer you tasty yields and trade at significant discounts to consensus price targets.

Read more »

Family relationship with bond and care
Dividend Stocks

TFSA Investors: 3 Cheap Canadian Stocks for Retirees

These three Canadian stocks are super cheap for retirees looking for a great buy that will last the test of…

Read more »

calculate and analyze stock
Dividend Stocks

CPP Disability Benefits: Here’s How Much You Could Get

Not everybody can get CPP disability benefits. If you want some passive income, consider investing in Royal Bank of Canada…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Boosting Your Monthly Income: TSX Stocks That Deliver

Dividend investing can boost regular or active incomes, especially select TSX stocks that pay monthly dividends.

Read more »