Some of the big Canadian bank stocks have been tough holds in recent years, but as a few of them are now leading the charge higher, I think investors searching for high yields, dividend growth, and capital gains may wish to revisit the scene.
Pursuing stocks based solely on their higher dividend yields or lower price-to-earnings (P/E) multiples may not lead to better total returns. That said, I do think the Big Six banking scene is full of intriguing candidates who may be able to make up for their relative lack of performance as we move into 2025.
So, as some banks soar to new highs while others struggle to sustain any sort of meaningful strength, you may wish to consider where all the big names stand today before you commit any more capital to the sector.
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Bank of Nova Scotia: An underrated stock
In this piece, we’ll check out an often-underrated Canadian financial in Bank of Nova Scotia (TSX: BNS), a Canadian bank with an impressive international business. Banking in emerging markets can bring greater long-term gains, especially as the domestic banking scene here becomes a bit more competitive, with six big players fighting for customers.
Though I still think Bank of Nova Scotia has the means to gain ground in Canada, it’s the Latin American region that could lead to greater (dividend) growth over the next decade, especially as the world economy bounces back from inflation while interest rates in major countries begin to retreat.
Of course, the added volatility and uncertainty that comes with emerging market exposure may not be right for everyone, especially Baby Boomer retirees seeking to cut risks where possible.
For me personally, BNS stock offers a great balance between risk and reward. And as the stock starts putting together a few encouraging quarters, it may be time to buy BNS stock before it can break out. With a likely bottom put in and newfound momentum enjoyed since August, perhaps BNS stock is a timelier bank than many income investors may think, especially should global economic conditions improve in 2025.
Despite rising 17% year to date, the stock is still cheap at just shy of 13 times trailing price-to-earnings (P/E). Further, recent changes in the global banking leadership team could act as some sort of spark to take BNS to much higher levels.
BNS’s dividend yield
Perhaps the biggest reason to buy Bank of Nova Scotia over any one of its five peers in the Big Six may be the size of its dividend yield.
At a towering 5.74%, BNS stock still has the most swollen yield, which could grow at a decent pace from here, especially if the bank can continue its ascent out of multi-year depths. I think the rally has legs, and Canadians just may be rediscovering the value in BNS as the tables turn for Canada’s incredibly resilient banks as they wander into a world of lower rates.
