The big Canadian banks have been a lagging group in recent years. Undoubtedly, macro headwinds have been hurting their ability to really grow earnings. And though dividend yields seem to be quite attractive at current levels, many investors may be finding comfort in some of the risk-free debt securities, many of which still sport pretty attractive rates (still close to 5%).
In any case, with the Bank of Canada recently holding off on rate cuts (no surprises) at last week’s meeting, some investors are pondering when the first (hopefully of many) rate cuts will begin to give the broader Canadian stock market a jolt.
Either way, I view the Canadian banks as intriguing buy options for patient long-term investors who want impressive yields and value for their portfolios.
Of course, the big bank bets could go either way over the near to medium term. And it’s been quite painful to hang onto the lagging banks, even as a long-term investor. While the future will always be uncertain, I think it’s safe to say that the yields we see today may be a heck of a lot more appealing five years from now, when rates are probably a great deal lower and inflation has been conquered.
Bank of Nova Scotia stock: Momentum, value, and a juicy dividend yield rolled into one!
When it comes to the yield heavyweights, it’s tough to top Bank of Nova Scotia (TSX: BNS) these days as it goes for just $66 and change per share to go with a 6.32% dividend yield. The dividend, while safe and well-covered, still stands out as a top reason to go for BNS stock over rivals. Combined with strong share price momentum since October 2023 lows and the still-depressed 10.9 times trailing price-to-earnings (P/E) multiple, I’m inclined to continue viewing BNS stock as one of the best banks for one’s dollar today.
Despite the solid run, BNS stock is still down around 20% from its early 2022 all-time highs, close to $84 per share. Though new highs may still be a year or more away, I certainly wouldn’t be surprised if BNS stock finds itself flirting with these heights by year’s end, especially if a Canadian recession can be avoided. Over the long run, the international segment may be a source of greater growth as BNS explores ways to bolster its Latin American divisions.
Additionally, the latest round of quarterly results were quite encouraging, with earnings per share (EPS) coming in at $1.69, slightly higher than the estimate calling for $1.61. The slight 4.7% upside surprise wasn’t massive, but it does give hope to numerous investors hoping for a reversal of fortune.
The Foolish bottom line for BNS stock investors
After a pretty good quarterly number, BNS stock looks like it’s ready to move on from its multi-year period of underperformance. Though it’ll be interesting to see how the Latin American business fares through the year, I still think expectations are just a tad too low for a bank that has a lot to prove. All considered, BNS stock stands out as one of the best dividend value plays in the TSX today.
