The TSX is chock full of companies that I’d consider blue chip in nature. Of course, there are plenty of prospective mining and energy companies that are not investment worthy. But when most investors think of the top Canadian companies in the TSX, their minds immediately go to some of the largest energy and financial names the country has to offer.
In this piece, I’m going to discuss Bank of Nova Scotia (TSX: BNS), a leading Canadian bank that’s down a little more than 10% from its recent high seen late last year. That’s not significant enough of a drop to discuss with most stocks. But for a company of this quality, that’s a decent buying opportunity that I think is worth exploring.
Here’s why I think Scotiabank stock looks like a strong buy right now for investors looking for a very long-term hold.
Image source: Getty Images
Fundamentals look very attractive
Scotiabank’s underlying business model is one which is easy to understand. The company is one of the top retail and commercial banks operating both domestically and in a number of international markets (most notably, high-growth markets in Latin America). I’ve commented frequently on the company’s geographic diversification, and that’s still a key reason why I think this stock is a buy.
The thing is, the company’s positioning in its key markets remains strong and has continued to propel its stock price to new all-time highs over time. With a return on equity of nearly 12% and a notable dividend yield above 6%, there’s a lot to like about the return this stock provides shareholders.
What’s notable is, this dividend and return ratio are based on strong earnings growth, as most analysts are projecting earnings growth of around 3.5% over the rest of the decade, with margins expanding over time as the company pushes for increased efficiencies.
A sustainable long-term holding
In order for any investment to be justified as a truly long-term holding, a given investor’s underlying thesis heading into such a position needs to continually be verified. Scotiabank has proven its value as a company that can withstand significant market drawdowns and provide ample returns during bull markets.
Thus, no matter which direction investors think the overall market is headed in the next year or two, looking a decade or two down the road, this is a company that will still be around and providing a meaningful return on investment. That’s the kind of stock I want to own long term, and I’d invite investors to do their own research on this name and see if it fits their risk/return profile.
