Canadian investors looking beyond our own markets may want to consider a bank stock with a dash of international flavour. One option that looks tasty at the moment is Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). Currently one of investing pundits’ top TSX bank stocks, Scotiabank brings with it a higher degree of international exposure than its Big Five peers. But does this alone make it a worthy addition to your dividend portfolio?
With a spread of market ratios that show Scotiabank competing attractively with other banks of the Bay Street cohort, the mix of excellent value with the stable passive income add up to a defensive addition to a portfolio with a broad financial horizon. However, there are two reasons why this bank is more innovative than it may appear.
A solid dividend stock with international spread
As Scotiabank’s value deepens, its dividend yield climbs. One of the best things about Big Five stocks is that they’re consistently good value for money. Today’s yield of 4.92% is marching steadily to the sweet 5% mark, and if the stock keeps getting beaten up, there could be a serious value opportunity for investors either sitting on the fence or waiting to double down for defensive dividends. Indeed, all the signs point to a nearly perfect mix of value and passive income.
The biggest worry of late for bank investors has been the pullback in mortgages, and this undercurrent persists, even as other market stressors impact the financials environment. Scotiabank in particular took a beating after an earnings miss and amid concerns of over-investment in foreign markets. However, in the long term, this overseas exposure is what might make this bank stock a better play than its more North American-focused peers.
Local links keep Scotiabank relevant in communities
In the past couple of months, Scotiabank has boosted its green asset campaign, the “Green Bond,” through which Scotiabank will “bring more diversity to our investor base and strengthen our commitment to a sustainable future,” as executive VP Tom McGuire put it. The bank also announced a five-year sponsorship agreement with the College of Family Physicians of Canada to support medical career development, awards, and scholarships.
On top of this continued drive for community relevance, the bank also nabbed the J.D. Power top spot for a banking mobile app. In short, Scotiabank is doing all the right things to ensure it climbs to the top of the Big Five pile. Indeed, should either the Canadian or American economies (or, indeed, both) take a turn for the worse in the foreseeable future, Scotiabank’s less North American-weighted customer base could help it scrabble to the dominant position.
The bottom line
While investment in North America has driven the growth of some of its Big Five peers, Scotiabank has taken a longer view, essentially betting on eventual bearishness in the U.S. and Canadian markets while strengthening its presence in the growth markets of the Pacific Alliance. Combined with its community-driven programs investing in Canadian institutions, Scotiabank could be the most forward-looking pick of the bunch.
