The best stocks for retirees are those that remain dependable over the long term and provide a high enough annual dividend for a viable source of passive income. This means a good strategy is for retirees to be risk averse and limit their choice to only large-cap companies with strong growth fundamentals.
One such stock is Scotiabank (TSX: BNS)(NYSE: BNS), which, at the time of writing, you can still buy for cheap and rake in solid earnings thanks to its decent yield and growth potential.
Too lucrative to ignore
The Bank of Nova Scotia often falls under the radar of many investors, being overshadowed by its other peers in the Big Five. However, there are many reasons why its stock is worth considering for your RRSP portfolio.
The first is its temptingly high dividend yield of 4.9%, which is the highest of the Big Five. Second, with a forward P/E ratio of 9.27, its stock is still trading reasonably cheap for the sector. Of course, the biggest reason to invest in this bank stock is its earning potential.
Scotiabank was one of the only two Canadian banks to beat estimates in last year’s fourth quarter, and revenue growth was more than double the average. Its stock returns were also among the top performing with a yearly return rate of 13.26%.
A banking pioneer
You usually don’t associate big banks with the term innovation, but Bank of Nova Scotia wants to be a clear exception. Last October, the bank announced its new Ultimate Account offering to its customers.
Aside from including all the bells and whistles that you expect from a premium banking account, you are also offered 10 free equity trades at Scotia iTRADE in the first year and five free equity trades every year after that — that totals a value of over $300 in free trade.
This move is a first for big banks, and what makes it all the more potent is that it combines banking and investing in one offer, contributing to customer stickiness with the bank.
To consolidate its move, the bank also recently acquired some of Canada’s leading independent investment firms, such as Jarislowsky Fraser and MD Financial.
International expansion
Instead of focusing on expanding directly south of the border, the bank has bucked the norm and has instead invested billions in recent years further south in the rapidly growing Latin American market. Specifically, the focus has been on four countries: Mexico, Peru, Columbia, and Chile, where, at the moment, banking penetration is still less than 50%.
One of its most significant moves was the $2.2 billion acquiring of majority stack in BBVA Chile, which effectively doubled its market share in the country to 14%.
Summary
With a growing international presence and solid performance in the domestic market as well as a decently high yield on offer makes Bank of Nova Scotia a great long-term stock for retirees interested in a viable source of good passive income.
