Bank of Nova Scotia (TSE:BNS) Is Paying Out A Dividend Of CA$1.06

The board of The Bank of Nova Scotia (TSE:BNS) has announced that it will pay a dividend on the 29th of October, with investors receiving CA$1.06 per share. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.

See our latest analysis for Bank of Nova Scotia

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Bank of Nova Scotia has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 73%, 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 34.4% over the next 3 years. The future payout ratio could be 57% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Bank of Nova Scotia Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from CA$2.48 total annually to CA$4.24. This means that it has been growing its distributions at 5.5% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Bank of Nova Scotia May Find It Hard To Grow The Dividend

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. In the last five years, Bank of Nova Scotia's earnings per share has shrunk at approximately 3.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Bank of Nova Scotia that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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