While the bank does lack much of the fanfare that some of the other Big Banks receive, Bank of Nova Scotia has quietly amassed a compelling host of reasons for investors to consider an investment, which are only amplified given the recent market correction.
Here’s a look at some of those reasons:
1. New acquisitions
Bank of Nova Scotia isn’t typically seen as the bank with an aggressive expansion policy, especially when compared with its peers that frequently announce major deals to enter new markets.
That view may be changing as Bank of Nova Scotia has announced a second major acquisition in under three months.
This week, Bank of Nova Scotia announced the acquisition of Montreal-based investment firm Jarislowsky Fraser in a deal reported to be worth $950 million. The investment firm has over $40 billion in assets under management consisting of both high net-worth and institutional clients.
The deal, which has already garnered the unanimous support of all firm partners, is expected to be closed subject to regulatory approvals later this year.
The Jarislowsky Firm will continue to operate with its existing management team and have autonomy in deciding investments. Once complete, Bank of Nova Scotia’s existing asset management arm, which already manages over $166 billion in assets, will become the third-largest asset manager in the country.
This latest deal comes after Bank of Nova Scotia announced a deal to purchase BBVA Chile, a subsidiary of Banco Bilbao Vizcaya Argentaria SA. That deal effectively doubled Bank of Nova Scotia’s share in Chile’s banking sector, which dovetails nicely with Bank of Nova Scotia’s Pacific Alliance venture.
2. Bank of Nova Scotia is key to the Pacific Alliance
Over the past few years, Bank of Nova Scotia has invested and expanded heavily in Chile, Columbia, Mexico, and Peru. Together, those four nations comprise the Pacific Alliance, a trade agreement aimed at reducing or completely eliminating tariffs between member states.
The trading bloc has already attracted the attention of over 40 other nations that have joined in the treaty in an observer status capacity. Canada is one of a handful of countries that includes Singapore that recently joined as associate members of the bloc.
The agreement has proven immensely successful for member states, and Bank of Nova Scotia’s prominent presence in all member states has become a de facto means of simplifying business between member states, which has helped the bank realize double-digit gains from its international segment during earnings season.
3. Bank of Nova Scotia is a great dividend play
It’s no secret that Canada’s banks make for some of the best paying dividend investments on the market. It’s also worth noting that the recent pullback in stock prices has provided an investment opportunity for those investors looking to pick up some great stocks at discounted prices.
Bank of Nova Scotia offers investors a quarterly dividend that pays out a very appetizing 4.12% yield. Bank of Nova Scotia has also established a precedent of increasing that dividend annually or better over the past few years, which is one reason Bank of Nova Scotia is often regarded as one of the best buy-and-forget income stocks.
Bank of Nova Scotia is set to provide updated quarterly figures later this month, but that shouldn’t deter would-be investors from purchasing this gem of an investment that is trading year-to-date at a 5% discount.
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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 Demetris Afxentiou has no position in any stocks mentioned.