Stock Analysis

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

TSX:BNS
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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 29th of July. Based on this payment, the dividend yield on the company's stock will be 6.6%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Bank of Nova Scotia

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

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

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 70%, 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 25.8% over the next 3 years. The future payout ratio could be 61% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

historic-dividend
TSX:BNS Historic Dividend June 14th 2024

Bank of Nova Scotia Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was CA$2.48 in 2014, and the most recent fiscal year payment was CA$4.24. This works out to be a compound annual growth rate (CAGR) of approximately 5.5% 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.

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 2.4% 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. 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.

In Summary

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. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Bank of Nova Scotia that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Bank of Nova Scotia is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.

Valuation is complex, but we're helping make it simple.

Find out whether Bank of Nova Scotia is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com