This Bank Is Still a Great Buy

Canada’s big banks are almost always stellar long-term buys. This bank is still a great buy for long-term income and growth investors.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

Finding the right investment takes patience and research. Often, investments that are perceived as stellar long-term buys are years away from reaching that potential. Fortunately, some stocks, such as Canada’s bank stocks, retain that stellar long-term appeal. Specifically, this one bank is still a great buy for investors.

Bank stocks are good: This one is great

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is neither the largest or most known of Canada’s big banks, but it is still a great buy.

Like its peers, Scotiabank operates a massive domestic segment that provides a handsome stream of revenue for the company. Where Scotiabank differs from its peers, however, is with respect to international expansion. More specifically, the difference lies with where Scotiabank has opted to expand.

Instead of focusing on the U.S. market, where some of its big bank peers have enjoyed stellar success in recent years, Scotiabank looked further south. Specifically, Scotiabank looked towards the Latin American nations of Chile, Columbia, Mexico, and Peru. Those four nations comprise a trade bloc that is known as the Pacific Alliance.

The Alliance is charged with fostering better trade and eliminating tariffs between its member states. Scotiabank has expanded heavily into those regions with an enviable branch network over recent years. That expansion paid off, as Scotiabank has become a preferred and trusted lender throughout the region. That factor alone solidifies the point that the bank is still a great buy.

What about results?

Now, with the economic reopening after pandemic-related closures, the extent of that investment is beginning to take shape. Fortunately, Scotiabank recently announced results for the fourth quarter, which we can look at.

In that quarter, Scotiabank’s international segment, which includes results from its Latin American holdings, reported an adjusted profit of $614 million. This not only topped expectations but also surpassed the amount reported in the same period last year by a whopping 74%.

Overall, Scotiabank reported a net income of $2.559 billion, or $1,97 per share. Compared with the same period last year, earnings came in 35% higher.

How about an early holiday gift?

One of the other notable points during the recent earnings announcement was with respect to dividends. When the pandemic hit back in 2020, Scotiabank, along with all of Canada’s banks, were barred from hiking dividends. This interrupted a well-known process of annual or better hikes to those dividends.

That moratorium was finally lifted last month. This means that the banks, which are awash in cash, can finally return some of those earnings to investors.

In fact, not only are the banks now reinstituting their quarterly dividends, but they are also providing a larger-than-usual dividend increase to make up for the lost time. In the case of Scotiabank, that amounts to a whopping 11% increase to its dividend, bringing the yield up to 4.77%. On a $35,000 investment, that works out to an income of nearly $1,670 in the first year alone.

That also makes Scotiabank one of the best-paying dividends on the market. But wait — there’s still more.

The bank is still a great buy

If that weren’t enough, there are two more points to keep in mind. First, Scotiabank’s stock price has already seen a whopping increase in 2021 of over 21%. As impressive as that sounds, this could just be the start. Interest rate increases across multiple markets will translate into further gains during the next quarterly update.

Finally, the bank is planning to repurchase 24 million shares, or approximately 2% of outstanding shares. In short, the bank is still a great buy. Buy it, hold it, and watch your portfolio grow.

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 owns shares of The Bank of Nova Scotia. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Bank Stocks

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

analyze data
Bank Stocks

The Average Canadian Stock Investor Owns This 1 Stock: Do You?

This Canadian stock has about 49% ownership by the public, and with growth and dividends to consider, it's a top…

Read more »

falling red arrow and lifting
Stocks for Beginners

1 Dividend Stock Down 18% to Buy Right Now

CIBC (TSX:CM) is a strong dividend stock investors should certainly consider not just for passive income, but future growth as…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

Forget TD Stock: 2 Tech Stocks to Buy Instead

TD remains a solid income stock but two outperforming tech stocks are better buys for their strong growth and upside…

Read more »

Question marks in a pile
Bank Stocks

Where Will Royal Bank of Canada Stock Be in 5 Years?

Royal Bank's continued focus on a strong capital position plus its acquisition of HSBC will likely ensure prosperous times ahead.

Read more »

Payday ringed on a calendar
Bank Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000 and TD Stock

TD (TSX:TD) stock has been a poor performer over the last few years, but could be a big passive-income winner…

Read more »

Man considering whether to sell or buy
Bank Stocks

Is RBC Stock a Buy, Sell, or Hold?

Shares of Royal Bank of Canada have delivered game-changing returns to shareholders in the last two decades. Is RBC stock…

Read more »

Dice engraved with the words buy and sell
Bank Stocks

Is Scotiabank (BNS) Stock a Buy, Sell, or Hold?

Let's dive into whether the Bank of Nova Scotia (TSX:BNS) remains a solid buy or if it's more of a…

Read more »