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 January, with investors receiving CA$1.06 per share. This means the dividend yield will be fairly typical at 5.4%.

See our latest analysis for Bank of Nova Scotia

Bank of Nova Scotia's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

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 71%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 29.7% over the next 3 years. Analysts forecast the future payout ratio could be 56% over the same time horizon, which is a number we think the company can maintain.

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 works out to be a compound annual growth rate (CAGR) of approximately 5.5% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Over the past five years, it looks as though Bank of Nova Scotia's EPS has declined at around 2.5% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Bank of Nova Scotia's Dividend

Overall, we think Bank of Nova Scotia is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 10 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.