Banks are typically a great investment unless they are doing shady investments, manipulating interest rates, and otherwise getting prosecuted by the government. Fortunately, Canadian banks tend to be much more conservative than their neighbors south of the border.
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is one of those banks that I believe belongs in most people’s portfolios. By default, you should own a bank because they can return so much money to you. Scotiabank is a growth bank that, while smaller than some of the Canadian behemoths, has expanded into some highly lucrative international markets that I believe could result in outsized returns for investors.
Here are two reasons why you should consider starting a position in Scotiabank or, if you already own shares, why you should potentially add more to your position.
Scotiabank has expanded aggressively into other parts of the world. The bank has operations in over 50 countries, which gives it the possibility of gaining rewards when one of those countries starts to do well. Its focus is in Mexico, Chile, Colombia, and Peru. And this focus is starting to pay off.
In its Q1 2015 earnings Scotiabank revealed that its Latin American operations saw commercial loan growth of 11% year over year. On top of that its retail loans grew by 13% year over year. When there is lending going on, it tends to mean that the country is growing and its people have faith in the economy. The more of this lending that happens, the better.
But where it gets better is when you consider the size of these countries. Consider that Canada has a little over 30 million people. The population of Mexico alone is 122 million and growing. This means that if you add on the other countries, there is a lot of room to grow. And that’s just four countries out of over 50 that Scotiabank is working in.
It is a consistent dividend payer
It’s not common that a stock that some refer to as a growth stock is also a dividend juggernaut, but I find that Scotiabank is really one of the best at rewarding its investors with significant returns.
The company recently increased its dividend by two cents a quarter, which brings it up to $2.72 per share per year. This is a lucrative yield of 4.21% that rewards investors for taking a chance on this growth.
Is it time to buy?
I’m clearly a fan of this bank above the others. I believe it has a great growth strategy and it pays its investors very generously. I have little doubt that investors would make good money if they owned this stock.
The bank reports today on its earnings and analysts are expecting better than last quarter, which saw a 1% increase in earnings. You can either buy before the announcement or wait until after the news. However, when it comes to a stock as lucrative as Scotiabank, I am not really a fan of trying to time the market. You may miss out on some pennies of capital gains, but you’ll more than make up for it with the yearly dividends.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Jacob Donnelly has no position in any stocks mentioned.