Yahoo Finance Bank of Nova Scotia's (TSE:BNS) Dividend Will Be Increased To CA$1.06
The board of The Bank of Nova Scotia (TSE:BNS) has announced that the dividend on 27th of July will be increased to CA$1.06, which will be 2.9% higher than last year's payment of CA$1.03 which covered the same period. This makes the dividend yield 6.2%, which is above the industry average.
See our latest analysis for Bank of Nova Scotia
Bank of Nova Scotia's Earnings Will Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Bank of Nova Scotia has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Bank of Nova Scotia's payout ratio of 61% is a good sign as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 19.4%. Analysts estimate the future payout ratio will be 58% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Bank of Nova Scotia Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$2.20 in 2013, and the most recent fiscal year payment was CA$4.12. This means that it has been growing its distributions at 6.5% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Unfortunately, Bank of Nova Scotia's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 11 analysts are forecasting a turnaround in our free collection of analyst estimates here. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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