Bank of Nova Scotia (TSX: BNS) is up about 15% in the past two months. Investors who missed the bounce are wondering if BNS stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on high-yield dividends.
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Bank of Nova Scotia share price
Bank of Nova Scotia trades near $74 at the time of writing. The stock is up about $10 from the 2025 low it hit in April but is still shy of the $80 it reached late last year and well off the $93 it hit at the beginning of 2022 at the peak of the post-pandemic rally in the bank sector.
The stock has underperformed its large Canadian peers over the past several years. This led to a leadership change in early 2023, followed by a strategic review of the bank’s businesses, including the international operations largely located in Latin America.
Bank of Nova Scotia spent billions of dollars over the past two or three decades to acquire banks and credit card portfolios in Mexico, Colombia, Chile, Peru, Panama, Costa Rica, and other countries. These markets have large segments of their populations that don’t use multiple banking services, if any. As the middle class expands, there should be scope for significant growth for the bank amid rising demand for loans, credit cards, and investment products. The four members of the Pacific Alliance trade bloc (Mexico, Colombia, Peru, and Chile) have a combined population of more than 230 million, so the market is large. Unfortunately for shareholders, the anticipated returns have not materialized, and Bank of Nova Scotia’s share price has lagged the performance of the other Canadian banks who placed their growth bets on different markets, including the United States.
New path
Under the new strategy, Bank of Nova Scotia is shifting growth capital to the United States and Canada and has started to sell some assets in Latin America. In 2024, the bank spent US$2.8 billion to buy a 14.9% stake in KeyCorp, an American regional bank. The deal gives Bank of Nova Scotia a platform to expand its U.S. presence. Earlier this year, Bank of Nova Scotia sold its operations in Colombia, Panama, and Costa Rica.
The stock’s pullback in the first three months of this year could be due to investor concerns about how U.S. tariffs will impact Mexico. The fact that Bank of Nova Scotia took a hit of more than $1.3 billion on the sale of the other Latin American assets likely didn’t help. Investors will have to keep an eye on the terms of any future deals in the region.
At home, Bank of Nova Scotia has identified British Columbia and Quebec as attractive markets for expansion. The bank created a new executive position last year to lead the expansion in Quebec.
It will take time for the turnaround plan to deliver results, and there could be some bumps along the way.
Time to buy?
Near-term volatility should be expected until there is more clarity on trade agreements between the U.S. and its neighbours. That being said, Bank of Nova Scotia deserves to be on your radar right now for a buy-and-hold dividend portfolio.
This is a contrarian pick, but there is decent upside potential, and investors who buy the shares at the current price can get a solid dividend yield of 6%.
