Better Passive-Income Buy: Bank of Nova Scotia or BCE?

BCE and Bank of Nova Scotia pay attractive dividends for investors seeking passive income.

| More on:
A worker drinks out of a mug in an office.

Source: Getty Images

Dividend investors have a chance to buy top Canadian income stocks at cheap prices after the latest market correction. Bank of Nova Scotia (TSX:BNS) and BCE (TSX:BCE) currently trade at discounted prices and offer attractive yields for a portfolio targeting passive income.

Bank of Nova Scotia

Bank of Nova Scotia is Canada’s fourth-largest bank by market capitalization. The stock had a rough run over the past year falling from more than $90 in early 2022 to below $64 in October and still only trades at $67, even after the recent bounce.

All the Canadian banks have come under pressure due to fears that soaring interest rates will trigger a plunge in the Canadian housing market. The recent failure of banks in the United States and Europe has added to investor jitters.

Bank of Nova Scotia’s large international operations located in Mexico, Peru, Chile, and Colombia might be another reason the stock remains out of favour. Political uncertainty and the impact of a potential global recession increase the perceived risk in the group. The other large Canadian banks have focused more on growing their American operations.

Ongoing volatility should be expected in the bank sector until the full impact of rate hikes on the Canadian and global economies is known, but contrarian investors seeking a good deal and an attractive dividend might consider buying Bank of Nova Scotia stock at the current multiple of just 9.4 times trailing 12-month earnings.

At the time of writing, BNS stock offers a 6.1% dividend yield.


BCE generates steady revenue and cash flow from essential mobile and internet services across its vast wireless and wireline networks. The company also operates a media group with assets that include a television station, specialty channels, online platforms, radio stations, and interests in sports teams. Retail locations round out the mix.

The core internet and mobile subscription businesses should see revenue hold up well during an economic downturn. People and firms have to be able to communicate, even when times get tough. BCE’s media business, however, is more likely to take a hit in a recession. Advertising revenue typically drops as clients tighten their belts. The sale of new devices could also slow down, with consumers deciding to keep older phones for longer.

BCE has indicated that it expects earnings to dip in 2023 compared to last year as a result of higher costs, partly driven by the surge in interest rates. Telecoms use debt to fund capital programs and the increase in borrowing expenses will have and impact this year.

That being said, BCE is still forecasting revenue growth and higher free cash flow. This is good news for dividend investors. The board increased the dividend by at least 5% annually in the past 15 years. Investors who buy the stock right now can get a dividend yield of 6.4%.

BCE trades for less than $61 per share at the time of writing compared to more than $70 last spring.

Is one a better buy today for passive income?

Bank of Nova Scotia and BCE pay attractive dividends that should continue to grow. BCE offer a slightly higher yield right now and is probably the safer choice for investors who are concerned about risks in the banking sector, so I would probably make the telecom giant the first choice.

Contrarian investors looking for high yield and a shot at some big capital gains might also want to start nibbling on BNS stock near the current level. If the central banks are able to deliver a soft landing for the economy, bank stocks could soar.

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.

The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

More on Investing

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

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

Here’s how to build a diversified portfolio with dividend stocks that, as a group, pay out in every month of…

Read more »

A plant grows from coins.
Dividend Stocks

Invest $10,000 in 2 TSX Stocks for $606/Year in Passive Income

Shares of these two fundamentally strong companies can start a worry-free passive income stream.

Read more »

dividends grow over time
Dividend Stocks

2 Top Dividend Stocks That Keep Raising Their Payouts

In addition to their solid dividend growth track record, these top dividend stocks also offer strong growth potential for the…

Read more »

Various Canadian dollars in gray pants pocket

3 No-Brainer Stocks to Buy Under $50

Investing in a core portfolio needs no-brainer stocks you can invest in at any time. These stocks you can buy for…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background

RRSP Pension: 2 Dividend Stocks to Buy on the Latest Dip

These top TSX dividend stocks now offer high yields.

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

How to Turn Your TFSA Into a Gold (or Copper) Mine Starting With $10,000  

These two top stocks can turn any TFSA into a gold mine -- or a copper mine, if you really…

Read more »

Dots over the earth connecting the world
Stocks for Beginners

Emerging Markets: Opportunities for High Returns in 2024

Are you looking for growth this year? Emerging markets could be one of the best areas to seek out high…

Read more »


My Top 5 TSX Stocks to Buy Right Now for Massive Returns in a Decade

These five TSX stocks have impressive operations and solid growth potential, making them five of the best to buy now.

Read more »