Bank of Nova Scotia (TSE:BNS) Is Due To Pay A Dividend Of CA$1.06

The board of The Bank of Nova Scotia (TSE:BNS) has announced that it will pay a dividend of CA$1.06 per share on the 28th of April. Based on this payment, the dividend yield on the company's stock will be 6.2%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Bank of Nova Scotia

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

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Bank of Nova Scotia has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 84%, which means that Bank of Nova Scotia would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 59.3% 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

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$2.56 in 2015, and the most recent fiscal year payment was CA$4.24. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. It's not great to see that Bank of Nova Scotia's earnings per share has fallen at approximately 6.1% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. 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.

Our Thoughts On Bank of Nova Scotia's Dividend

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 11 analysts we track are forecasting for the future. 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.