While Canada’s banking sector is heavily regulated, it allows the big TSX banks to benefit from competitive moats such as high entry barriers. Moreover, Canadian banks have a far more conservative lending approach than their peers south of the border. This risk-averse approach allowed most TSX banks to maintain their dividend payout ratios even during the Great Financial Crisis in 2008.
Bank of Nova Scotia (TSX:BNS) is one such blue-chip company that offers you a tasty dividend yield of 6.5%. So, let’s see if you should own BNS stock at its current valuation.
Is BNS stock a good buy right now?
Scotiabank recently hosted its Annual General Meeting in Halifax, marking a symbolic return to the city where it was established nearly 200 years ago, as Chief Executive Officer (CEO) Scott Thompson outlined the company’s strategic priorities and progress.
Thompson, who has been at the helm for five quarters, emphasized the bank’s focus on redeploying capital in North America, with particular attention to its home market of Canada. The CEO pointed to the bank’s 35% share price appreciation last year, which he described as “in the middle of the pack” among financial industry peers.
“Our vision is to be our clients’ most trusted financial partner,” Thompson told shareholders, highlighting efforts to earn more primary client relationships and grow deposits. The strategy appears to be gaining traction with retail customers, as the bank has added over 200,000 primary clients since launching its refreshed approach. This growth has been driven by the Scene+ loyalty program, which now has 15 million members, 25% of whom hold Scotiabank payment products.
Thompson acknowledged shareholder concerns about Scotiabank’s dividend, which has remained unchanged for eight quarters. “Our dividend payout ratio was too high,” he explained, adding that the bank needs to “grow earnings at a reasonable rate and restart the dividend.”
BNS also maintained its BBB+ investment-grade rating while improving its capital ratio by approximately 140 basis points since late 2022.
A strong performance in fiscal Q1 of 2025
In the fiscal first quarter (Q1) of 2025 (ended in January), Scotiabank reported adjusted earnings of $2.2 billion, or $1.76 per share, as it continues to execute its strategic focus on North American markets.
CEO Scott Thomson highlighted the bank’s 15% year-over-year growth in non-interest revenue, driven by robust capital markets activity and wealth management performance. Global Banking and Markets delivered impressive results, with earnings up 33% year over year.
BNS maintained a strong capital position with a common equity tier-one ratio of 12.9% despite closing its investment in KeyCorp during the quarter.
Provision for credit losses remained elevated at $1.2 billion, partly reflecting the inclusion of potential tariff impacts in the bank’s economic outlook. Chief Risk Officer Phil Thomas characterized any potential tariff-related impact as “sizable but manageable.”
BNS reported deposit growth of 4% year-over-year, outpacing loan growth and reducing its loan-to-deposit ratio to 105%. Notably, Thomson expects 2025 earnings growth “towards the higher end” of the bank’s 5% to 7% target range.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Bank of Nova Scotia | $65.53 | 1,180 | $1.06 | $1250.8 | Quarterly |
To earn $5,000 in annual dividends, you must buy 1,180 company shares worth $77,325 today. In 2025, BNS will pay shareholders an annual dividend of $4.24 per share. Moreover, Bay Street expects its dividends to grow to $5 per share in 2029. So, if you own 1,180 shares in 2029, you could earn $5,900 in annual dividends, increasing your yield at cost to 7.6%.
