Yahoo Finance Why Dividend Hunters Love The Bank of Nova Scotia (TSE:BNS)
Over the past 10 years The Bank of Nova Scotia (TSE:BNS) has been paying dividends to shareholders. The company is currently worth CA$87.6b, and now yields roughly 4.8%. Does Bank of Nova Scotia tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Bank of Nova Scotia
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has it increased its dividend per share amount over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How well does Bank of Nova Scotia fit our criteria?
The current trailing twelve-month payout ratio for the stock is 47%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 47%, leading to a dividend yield of 4.8%. In addition to this, EPS should increase to CA$7.22.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of BNS it has increased its DPS from CA$1.96 to CA$3.4 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Bank of Nova Scotia generates a yield of 4.8%, which is high for Banks stocks but still below the market’s top dividend payers.
Next Steps:
Considering the dividend attributes we analyzed above, Bank of Nova Scotia is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for BNS’s future growth? Take a look at our free research report of analyst consensus for BNS’s outlook.
Valuation: What is BNS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BNS is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
