The TSX’s banking sector has regained strength from a year ago, aided by the Bank of Canada’s rate-cutting cycle. As of this writing, all the Big Banks are up year-to-date. However, the Bank of Nova Scotia (TSX:BNS) has the smallest gain thus far in 2025, at only 1.7%.-plus. While the bank stock advanced by 29.3% in the last 12 months, it fell short of beating the broad market.
Nonetheless, BNS remains a smart buy for value and income investors. Based on the 12-month high price target ($81) of market analysts, the upside potential is 7.8%. If you invest today, the share price is $75.11. More importantly, you can enjoy the generous dividend yield while the upward momentum continues.
Dividend giant
Performance-wise, BNS lags behind its sector peers, but this doesn’t necessarily indicate a mediocre investment. The $93.5 billion bank, Canada’s fourth-largest financial institution, is a dividend giant. This lowest-priced Big Bank stock pays a hefty 5.8%, the highest yield in the elite circle.
A $25,000 position today will grow to $106,518.70, including dividend reinvestment, in 25 years. The resulting amount will generate $1,555,17 in quarterly income streams. BNS’s 193-year dividend track record is why the stock is ideal for retirees. Furthermore, the 15-year dividend growth streak is an impressive feat.
Solid financial position
In Q2 fiscal 2025 (three months ending April 30, 2025), total revenue increased 8.8% year-over-year to $9.1 billion, while net income declined 2.9% to $2 billion compared to Q2 fiscal 2024. For cushion, the provision for credit losses (PCL) rose 38.8% to $1 billion from a year ago.
Global Wealth Management was the standout performer, with $405 million in earnings, representing 17% year-over-year growth. The expanding active Exchange-Traded Fund (ETF) product suite also received a warm reception from clients despite market volatility.
Scott Thomson, President and CEO of BNS, said, “Amidst the continuously-evolving economic outlook, we are focused on what we can control and are executing on our strategic plan while continuing to deliver positive operating leverage. This quarter we increased our performing allowances to reflect the impact of an uncertain macroeconomic outlook.”
According to Thomson, management has not seen a meaningful deterioration in credit. The outlook is evolving and the operating environment is unique. He also assured that, given the strong balance sheet metrics, BNS is well-positioned to navigate this period of uncertainty. The bank will also seize growth opportunities as they arise.
Furthermore, BNS announced a return to growth through a 10% increase in its quarterly dividend, as well as a share buyback program for 20 million shares.
No-nonsense investment
Thomson feels good about the momentum heading into the second half of the year. He is confident about achieving 5% to 7% earnings per share (EPS) growth in fiscal 2025. Among the immediate plans is the rollout of a tailored value proposition for priority segments across the core markets by the end of this fiscal year.
BNS is a no-nonsense investment if you desire healthy, long-term returns and uninterrupted dividend income. This Big Bank stock is suitable for value and income investors.
