Bank of Nova Scotia Dividend | Excellent Long-Term Potential for Investors

September 6, 2021 | Editorial Team

Bank of Nova Scotia dividend payments have proved consistently reliable over the years, making it a great long-term stock choice for investors following the dividend capture strategy. Future performance projections are generally solid for the bank – particularly for those focusing on gradual but ongoing financial growth through dependable dividend yield earnings.

Bank of Nova Scotia is an established and reputable provider of private and commercial banking products and services. The company has an established presence in most major towns and cities across Canada, along with countless locations in the United States, the Caribbean, Mexico, Columbia, Chile, Peru and elsewhere.

To date, Bank of Nova Scotia has opened more than 950 branches across Canada and beyond, along with around 3500 automated banking machines and 5200 ATMs. The past history of the bank combined with its excellent financial track record have long had made it a popular target for investors trading on the Canadian stock market.

What Is a Bank of Nova Scotia Dividend?

A dividend is a payment that a company makes to its shareholders, as a means of sharing its profits. Dividend payments are made on a regular basis and can generate dependable long-term profits for shareholders carrying the right stocks.

Specifically, a dividend payout is paid per share of stock. This would mean that if you own 50 shares of stock in a company that pays an annual cash dividend of $3, you would earn $150 per year. Shareholders then routinely reinvest these earnings in additional stocks to continuously increase dividend payments, which are usually made on a quarterly basis.

However, not all stocks deliver cash dividends in the same way. They’re also stock dividends, dividend reinvestment programs and various additional ‘special’ dividends. All of which have their own unique points of appeal for investors, depending on the long-term goals of the shareholder in question.

Company overview:

Name: The Bank of Nova Scotia

Ticker: BNS

Exchange: TSX

Founded: 1832

Industry: Diversified Banks

Sector: Banks

Market Cap: CA$94.962b

Shares outstanding: 1.22b

How Often Do Banks Pay Dividends?

The vast majority of banks make quarterly dividend payments. This means a dividend payout is made four times a year, but there are exceptions to this standard.

It is ultimately down to the bank’s board of directors to make these kinds of financial decisions on its behalf. There is no specific rule that states a bank or company must make a quarterly dividend payment – it’s entirely up to the institution in question.

For shareholders following the dividend capture strategy, it isn’t of huge significance as to whether there is a single dividend date or four dividend dates per year. Consequently, a bank or company that only makes a dividend payment annually isn’t usually a deal-breaker within this type of investment strategy.

Bank of Nova Scotia Dividends: Recent Dividend History

It was announced earlier this year by the board of The Bank of Nova Scotia that the company would pay a dividend of CA$0.90 per share on the 28th of July. This equated to an overall annual dividend payment of 4.4% of the bank’s current stock price – slightly higher than the industry averages.

Reports on the office desk

One of the main points of appeal with Bank of Nova Scotia for prospective investors is its strong outlook as of today. Prior to the announcement being made earlier this year, there were issues at BNS with free cash flows. This subsequently meant that the bank’s balance sheets were likely to come under pressure, making returning cash to stockholders a challenge.

Looking forwards, analysts are now predicting EPS growth for BNS of 20.7% over the next year. Should the dividend continue along its current trajectory, we could be looking at a payment ratio of 50% at some point next year. This suggests a highly sustainable and reliable stock purchase option, for investors playing the long game.

Though none of this is particularly surprising when considering the longer-term financial record of BNS. The bank’s dividend payments have been extremely stable for some time now. The annual dividend payment to shareholders in 2011 was CA$1.96, increasing to a much higher CA$3.60 for the most recent fiscal year.

This equates to an impressive 6.3% compound annual growth rate each year during this period. Dividend yields have been growing smoothly and reliably for several years now, providing BNS shareholders with plenty of reason to maintain its stocks in their portfolios.

BNS Payout History (Paid and Declared)

The table below provides a brief overview of Nova Scotia Bank’s paid and declared payout history over the past year:

YEAR CALENDAR YEAR PAYOUT CALENDAR YEAR PAYOUT GROWTH PAY DATE DECLARED DATE EX DIVIDEND DATE PAYOUT AMOUNT QUALIFIED DIVIDEND? PAYOUT TYPE FREQUENCY DAYS TAKEN FOR STOCK PRICE TO RECOVER
2021-07-28 2021-06-01 2021-07-02 $0.7274 Income Regular Quarterly
2021 2021-04-28 2021-02-23 2021-04-05 $0.7135 Income Regular Quarterly 16
2021-01-27 2020-12-01 2021-01-04 $0.7021 Income Regular Quarterly 2
2020-10-28 2020-08-25 2020-10-05 $0.6733 Income Regular Quarterly 2
2020 $2.6634 33.819% 2020-07-29 2020-05-26 2020-07-06 $0.6628 Income Regular Quarterly 7
2020-04-28 2020-02-25 2020-04-06 $0.6346 Income Regular Quarterly 0
Source: dividend.com

Bank of Nova Dividend Growth

Despite having achieved only one year of consecutive growth as of 2021, BNS nonetheless has an exceptionally strong past history of dividend yield improvements:

1 YEAR ANNUALIZED GROWTH 3 YEAR ANNUALIZED GROWTH 5 YEAR ANNUALIZED GROWTH 10 YEAR ANNUALIZED G 20 YEAR ANNUALIZED GROWTH YEARS OF CONSECUTIVE DIVIDEND GROWTH
33.82% 10.86% 10.86% -1.07% 39.09% 2950.86% 1
Source: dividend.com

Dividend Performance in Brief

According to the latest figures published by Simply Wall Street, dividend performance in general at BNS is outpacing that of most comparable dividend payers on the market:

• Notable Dividend: BNS’s dividend (4.61%) is higher than the bottom 25% of dividend payers in the Canadian market (1.65%).

• High Dividend: BNS’s dividend (4.61%) is in the top 25% of dividend payers in the Canadian market (4.45%)

• Stable Dividend: BNS’s dividends per share have been stable in the past 10 years.

• Growing Dividend: BNS’s dividend payments have increased over the past 10 years.

Source: simplywall.st, September 2021

Stock Performance in Brief

Current data from Simply Wall Street also suggests that BNS stock remains a robust and reliable choice for investors looking to generate good long-term returns with a relatively safe stock choice:

• Return vs Industry: BNS exceeded the Canadian Banks industry which returned 35.1% over the past year.

• Return vs Market: BNS exceeded the Canadian Market which returned 27.2% over the past year.

• PE vs Industry: BNS is good value based on its PE Ratio (10.8x) compared to the Canadian Banks industry average (11.6x).

• PE vs Market: BNS is good value based on its PE Ratio (10.8x) compared to the Canadian market (12.3x).

• PB vs Industry: BNS is good value based on its PB Ratio (1.4x) compared to the CA Banks industry average (1.5x).

• Earnings Trend: BNS’s earnings have grown by 0.4% per year over the past 5 years.

• Accelerating Growth: BNS’s earnings growth over the past year (25.1%) exceeds its 5-year average (0.4% per year).

Source: simplywall.st, September 2021

What is the Dividend Capture Strategy?

The dividend capture strategy is a popular stock trading strategy among day traders. With reliable stocks like BNS, the usual approach is to purchase and hold onto shares indefinitely. And in doing so, generate a steady income stream as dividends are paid quarterly or annually.

With the dividend capture strategy, it’s more a case of purchasing shares, holding on to them for just long enough to capture the dividend and subsequently selling them. It is a fast and frenetic trading strategy, wherein the stocks could be held by the investor for no more than a single day.

Long enough to capitalise on the dividend yield, without any subsequent risk of the stock price falling and resulting in capital losses.

Among traders using the dividend capture strategy, companies that provide an annual dividend payment are preferable over those who provide them quarterly (or even monthly). The investor has no specific interest in the bank’s long-term projections or future financial performance – they simply want to hold their stocks temporarily to pocket the dividend payouts.


The Bottom Line

On the basis of its past history and projected future performance, Bank of Nova Scotia is currently seen as a relatively safe bet among investors. BNS stock for both income and growth has a huge potential over the coming years, with its stock having gained in excess of 45% within a single year and further gains predicted.

The upward trend is expected to continue on the back of the company’s excellent earnings, economic activity improvements and revival in demand. BNS has also been investing heavily in digital banking and exposure to high-growth markets over recent years, likewise paving the way for a successful future.

Bank of Nova Scotia, therefore, has excellent long-term potential for investors looking to generate reliable annual yields through dependable dividend payments. It’s also a prime stock choice for investors preferring the dividend capture approach, with the potential to generate moderate yet reliable short-term profits.