Since the beginning of the year, one of Canada’s largest six banks, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), is trading down more than 10% on concerns surrounding the company’s international operations. This anomaly provides an intriguing opportunity for value investors to buy this dip – and the dips to come – for a few key reasons.
Scotiabank has been one of my top picks for long-term income investors and those considering entering retirement in the next 10 to 20 years, due to the bank’s geographical presence and the ability of Scotiabank to leverage its Canadian operations worldwide. For years, Scotiabank has purposely invested in key regions of South America management saw were under-represented in North America. As such, Scotiabank’s presence in four Pacific Alliance countries: Chile, Peru, Mexico and Colombia are unmatched among North American banks.
In Chile, much ado was made about the company’s continuing investments in the country, with Scotiabank’s recent purchase of BBVA resulting in a significant write-down for investors, which led to much of the recent downside in the lender’s stock price.
Nonetheless, this acquisition has bolstered Scotiabank’s presence in Chile, making the third-largest Canadian bank the second-largest privately-held Chilean bank.
Scotiabank currently ranks second among Canada’s largest six banks in terms of dividend yield, but should the company’s stock price slide continue, seeing the lender’s yield rise to the top of the pile may not be unrealistic. From a yield perspective (as well as the ability for Scotiabank to continue to grow its dividend distribution over time), my take is that Scotiabank should be the top consideration for income investors looking at which banks to buy today.
Dividend yield and growth over time are huge considerations for long-term investors, who will eventually see the vast majority of their gains from dividends rather than growth over long periods of time. Scotiabank is one of those companies that’s poised to grow at a significant clip over time, thereby securing dividend increases over time for investors.
For Canadian investors looking for a bank that is focused on international growth outside of the United States, Scotiabank really is unparalleled. Scotiabank is one of the best Canadian banks from a cost perspective and is likely to continue to grow faster over the long run due to its leverage to international markets, relative to its peers.
I would encourage all long-term income investors to consider Scotiabank at this point in time above its peers, for these reasons.
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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 Chris MacDonald has no position in any stocks mentioned in this article.