When the stock market dips, most new investors and even some experienced investors focus too much on the drop in share prices. Savvier investors with a good long-term strategy know these periods are an opportunity to capitalize on bargains in the stock market. They know how to see through the noise and use the chance to invest in stocks trading at discounts due to the panic-fueled sell-off.
The S&P/TSX Composite Index, the benchmark index for the Canadian stock market, has shown considerable volatility over the last few weeks. However, the index indicates that the broader market is on the rise again. As of this writing, the index is up by 12.67% from its April 8th low. While the broader market is getting closer to its 52-week high, several high-quality TSX stocks are still arguably undervalued right now.
It might be the perfect time to invest in such stocks and hold onto the shares for the long run to take advantage of capital gains and dividends for meaningful wealth growth. One such stock is Bank of Nova Scotia (TSX:BNS).
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Scotiabank stock
Also called Scotiabank stock, Bank of Nova Scotia is a $82.21 billion market-cap Canadian multinational banking and financial services company headquartered in Toronto. It is one of the Big Six Canadian banks, but it is neither the largest in market cap nor the oldest among them. However, Scotiabank boasts an edge over its closest peers: it has the biggest international presence among the Big Six.
Having an international presence is becoming increasingly important. The domestic market is already saturated, and there’s a limit to how much Scotiabank can grow. Foreign markets offer a lot more opportunities for the Canadian bank to explore growth. Besides providing more growth opportunities, a sizeable presence in international markets also diversifies revenue streams for the bank. Scotiabank can count on its international operations to provide a bit of relief if its domestic operations underperform due to Canada-specific economic challenges.
Juicy dividend income
Scotiabank, like its Big Six peers, is a staple investment in many portfolios. One of the primary reasons is its terrific track record as a dividend stock. As of this writing, Scotiabank stock offers a juicy 6.06% dividend yield that you can lock into your self-directed portfolio. You can even use a dividend-reinvestment program to take the dividends you earn and buy more shares of the stock to accelerate your wealth growth by unlocking the power of compounding.
The fact that Scotiabank stock has been paying shareholders their dividends without fail for almost two centuries makes it an easy pick if you want a buy-and-forget holding for your self-directed investment portfolio.
Foolish takeaway
As of this writing, Scotiabank stock trades for $70.02 per share and pays $1.06 per share each quarter to shareholders. Trading at an over 12.6% discount from its 52-week high, Scotiabank stock has yet to recover to better valuations amid the ongoing market rally. A $7,000 investment in the stock could mean you can own almost 100 shares of the stock and generate over $400 per year in dividends each year through dividends alone.
Allocating available contribution room in a Tax-Free Savings Account (TFSA) would mean you can enjoy that passive income without incurring any taxes on it. Remember, this was just an example of the kind of returns you can get. You should never put all your eggs in one basket, but Scotiabank stock can be an excellent foundation for your self-directed portfolio.
