Sorry for not posting on Monday. I was away on vacation for a week and I am running a bit behind with my articles! However, during my vacation, I had a few minutes to gather all the necessary information to analyze what could be my next move: ScotiaBank (TSE: BNS).
I guess you already know my love for Canadian Banks by now. The Big 6 (Royal Bank (RY), TD Bank (TD), ScotiaBank (BNS), CIBC (CM), Bank of Montreal (BMO) and National Bank (NA) are solid companies evolving in a sector that is both solid and is heavily protected by the government; Canadian financial institutions. To be honest, I think that that if you buy any Canadian Bank, you are making a good deal. In this dividend stock analysis, I’ll tell you why BNS is my pick.
The Company Stock Description:
ScotiaBank is the 3rd largest bank in Canada in terms of assets. One thing I really like about it is that while they are pretty strong in Canada, they are also the most international of Canadian Banks. They have over 70,000 employees working in more than 50 countries. Besides their Canadian activities, they are mainly active in South America and Asia. With all those countries, it’s better than currency trading! BNS offers everything a bank can offer through their divisions (savings and loans, investing services, trust, commercial banking, wealth management, international financial services, etc.).
The Company Ratios and Financial Info:
Dividend Metrics (as of Jan 2011):
– Current Dividend Yield: 3.50%
– 5 year Dividend Growth: 7.58%
– 1 year Dividend Growth : 0%
Company Metrics :
– Sales Growth: 5.67%
– Earning Growths: 33.04%
– P/E Ratio: 14.41
– Margin Growth: N/A
– Payout Ratio: 50.1%
– Return on Equity: 18.06%
– Debt to Capital Ratio: 1.20
– Ticker: BNS (on TSE (Canadian) and on NSE (US))
– Price: $56.46
– Trading Volume: 3,232,840
– Trend (technical analysis): Trading over moving average
Upcoming opportunities and dangers:
BNS is clearly capitalizing on one of their main advantages; they grew stronger from the 2008 credit crunch. All Canadian banks kept posting profits and increased their capital. This is how ScotiaBank recently bought DundeeWealth (Canadian wealth Management Company) in order to increase its presence in the wealth management sub-sector. This allowed BNS to jump from the 11th to 5th place in terms of assets under management in Canada.
Another great point is that financial analysts expect BNS to raise their dividend in 2011 (going back to a raise every 2 quarters scenario). This is always good news for dividend investors ;-).
On the other hand, while BNS takes care of its Achilles’ heel in wealth management, it will certainly not be the leader in term of loans in Canada. In fact, their growth will definitely not come from this sector which is led by other Canadian Banks.
While I like the fact that BNS is diversified among many South American and Asian countries, this also exposes them to more economic fluctuations in those countries. A double-dip recession in some countries will affect them badly.
Since I am already holding the smallest and most Canadian concentrated bank in my portfolio (National Bank, NA), I think that BNS will be a great addition to my portfolio since it is completely the opposite. I certainly don’t expect the stock to rise like there is no tomorrow (this chance happened in 2009… now it’s too late). However, I think BNS will be a solid dividend payer that will raise its dividend from time to time.
I should be getting an additional $5,000 in my brokerage account by next week. BNS will definitely be a buy at that time. What do you think?
if your favorable on CDN Bank stocks…. why not get a basket of them and collect 2x as much yield as you would get from just holding the that one bank.
look into something like TSX: DFN
I think you’re right regarding BNS. My only concern is getting in now. You would most likely get a better point of entry this summer. If this is for the very long term, it doesn’t really matter.(unless we get a 2008 opportunity again!) I enjoy your articles.
yes, it is for long term (my RRSP account) so I don’t really mind about market timing. I’m doing the transaction this week probably 😉
I like BNS. I wouldn’t mind a dividend increase from it for 2011 either. Add this one to your list of DRIPpers.
On what dates Canadian Banks Pay Dividend? Can some one answer?
I like BNS, too, and have held it for about a year. It is one position I am considering adding to in the near term. I’m curious, though — what are the analysts that are expecting dividend increases in ’11? I had read much speculation on that in the fall, but more recently I’ve seen more expecting BNS to be one of the later Cdn banks to increase, and maybe not until ’12.
I agree with you, the ScotiaBank is a good play. I bought a good chunk some time ago. It has had a nice run. It’s a solid bank with a fine dividend and there is every indication that the dividend will increase. Another possible plus but not one that is not certain, the stock may split in 2011 if the stock price continues to climb.