Bank of Nova Scotia (TSE:BNS) Is Increasing Its Dividend To CA$1.06

The Bank of Nova Scotia (TSE:BNS) will increase its dividend from last year's comparable payment on the 27th of July to CA$1.06. This will take the annual payment to 6.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Bank of Nova Scotia

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Bank of Nova Scotia has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Bank of Nova Scotia's last earnings report, the payout ratio is at a decent 61%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 28.9%. 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 an extended history of paying stable dividends. The annual payment during the last 10 years was CA$2.28 in 2013, and the most recent fiscal year payment was CA$4.24. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. However, Bank of Nova Scotia's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. 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.