The TSX is near its record high, but some top Canadian dividend stocks still trade at discounted prices and offer attractive yields today.
Bank of Nova Scotia (TSX: BNS) started the year off in a downward trend but has recently picked up a tailwind. Investors who missed the bounce are wondering if BNS stock is still cheap and good to buy a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
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Bank of Nova Scotia stock
Bank of Nova Scotia trades near $72 per share at the time of writing compared to $80 last fall and as high as $93 in 2022 before rising interest rates pushed the bank sector into a pullback.
The bank is working through a strategy transition under its new CEO that will see Bank of Nova Scotia invest more in the United States and Canada to drive growth. This is a shift from previous management teams that bet big on Latin America over the past 20 or 30 years, acquiring assets in Colombia, Mexico, Peru, Chile, and other markets in the region. Latin America offers attractive potential as the middle class expands, but Bank of Nova Scotia’s shareholders have not reaped the anticipated rewards. The stock has underperformed the other large Canadian banks that focused more on opportunities in other regions, including the United States.
Bank of Nova Scotia spent US$2.8 billion in 2024 to buy a 14.9% stake in KeyCorp, an American regional bank. The move gives Bank of Nova Scotia a good platform to expand its U.S. presence. The bank is also looking to grow in Quebec. Earlier this year, Bank of Nova Scotia sold its operations in Colombia, Panama, and Costa Rica. The bank booked a charge of more than $1.3 billion on the sale, which is probably why the stock dropped in the first part of 2025.
Earnings
Bank of Nova Scotia just reported fiscal second-quarter (Q2) 2025 results. Adjusted net income came in at $2.07 billion compared to $2.1 billion in the same period last year. Adjusted diluted earnings per share (EPS) slipped to $1.52 from $1.58. Adjusted return on equity was 10.4% compared to 11.3% in the same period in 2024.
The stock initially dipped on the earnings news but then moved higher. Bank of Nova Scotia announced a 3.8% dividend increase despite the overall challenging market conditions. Provisions for credit losses (PCL) rose to $1.4 billion from $1.16 billion in fiscal Q1 2025 and $1.0 billion in fiscal Q2 2024. High interest rates and weakening economic conditions due to tariffs and trade uncertainty are putting pressure on businesses and households with high levels of debt. PCL is not a concrete loss but rather an estimate for what might be coming according to the bank’s economic outlook. If conditions improve, the bank could reverse the provisions in future quarters.
Time to buy BNS stock?
This is arguably a contrarian pick, given the uncertainty and potential downside in the coming months, but the bank remains very profitable and has a strong capital position to ride out the turbulence. Investors get a 6% dividend yield at the current share price, so you get paid well to wait for the turnaround plan to deliver results. If you have some cash to put to work, this stock deserves to be on your radar.
