When it comes to the Big Six banks, they all seem pretty great. Yes, even though each of them is currently down in the markets right now. I would still consider pretty much every one a great buy. That’s because here in Canada, we enjoy an oligopoly on banks. It’s not so great for deals but definitely great for keeping your cash safe.
Yet perhaps the best deal in terms of investing is Bank of Nova Scotia (TSX:BNS), better known as Scotiabank. The company has a great combination of high dividends and growth through emerging markets right now. So, let’s look at why investors may want to consider it today.
Top three
Scotiabank stock is currently the third largest of the Big Six Banks by assets, with a market capitalization at $72.8 billion as of writing. These banks hold 90% of the country’s banking deposits, yet Scotiabank is known as the most international bank of the bunch.
The company does have half of its revenue in Canada; however, over 40% of its operations are in other countries. This includes emerging markets such as Mexico, Peru, and Chile. There is a tiny bit in the United States as well. Emerging markets have been a huge focus of the company, with a major focus on Mexico for Scotiabank stock. It’s then been reducing exposure in more volatile areas. But it’s also been expanding at home.
Scotiabank stock is trying to take on more in Canada. It’s focused on domestic wealth operations, mortgages, and auto lending in the past. It’s now not just the third-largest bank but the third-largest active manager in Canada for domestic wealth operations.
Is emerging markets risky?
It can be. However, international exposure, in this case, gives Scotiabank stock and its investors the potential for large returns — especially when compared to its peers. While the pandemic was hard, the bank’s acquisitions have helped it make large progress toward improving its efficiency.
Now, there seems to be a renewed focus on emerging markets that are perhaps safer. This includes the multiyear life to improve performance across the board. There will be more focus on Mexico and reducing risky exposure, as mentioned.
So, for now, Scotiabank stock looks incredibly valuable. As investors gain confidence back in the market and the bank, there should be large returns on the way for the company.
Value for a dividend
For now, investors seeking value should certainly consider Scotiabank stock. The bank currently offers a dividend yield of a whopping 7.1% as of writing! That’s while trading at 10.38 times earnings as well, with shares down 15% in the last year.
That dividend looks safe and secure, which cannot be said for all dividend stocks these days. It currently holds a payout ratio of 72.32%. This is well within a healthy ratio level, which is between 50% and 80%. Therefore, the bank shouldn’t have to suddenly cut the dividend to make ends meet.
This means you could be in for large returns from the company as well as major dividend income. You can take hold of a massively high yield while it lasts and see returns come in as emerging markets recover. Investors can likely look to a great start to 2024.
