Bank of Nova Scotia (TSE:BNS) Has Announced A Dividend Of CA$1.06

The Bank of Nova Scotia's (TSE:BNS) investors are due to receive a payment of CA$1.06 per share on 28th of April. Based on this payment, the dividend yield will be 5.9%, which is fairly typical for the industry.

View our latest analysis for Bank of Nova Scotia

Bank of Nova Scotia's Dividend Forecasted To Be Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Bank of Nova Scotia has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Bank of Nova Scotia's payout ratio of 84% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 49.2% over the next 3 years. Analyst estimates also show the future payout ratio being 55% in the same 3 years which brings it into quite a comfortable range.

Bank of Nova Scotia Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$2.56 in 2015 to the most recent total annual payment of CA$4.24. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Bank of Nova Scotia's earnings per share has shrunk at approximately 6.1% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bank of Nova Scotia's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Is Bank of Nova Scotia not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.