Inflation doesn’t rest — and neither should your money. With the rising cost of living squeezing Canadian wallets, one of the smartest moves investors can make is focusing on income-generating assets. Dividends, in particular, offer a way to turn idle capital into a real helper, paying for monthly expenses. Imagine covering your $50 mobile data plan every month with passive income alone.
But dividend investing requires discipline and a sharp eye. Not all yields are created equal. Chasing sky-high dividend payouts without understanding the risks can lead to disappointment. Often, abnormally high yields are a red flag, signalling a company in distress or a dividend at risk of being cut. That’s why it’s crucial to dig deeper and ensure the payout is sustainable.
I’m fully backing this dividend stock
Right now, I’m all-in on one stock that offers a juicy 5.8% yield and the long-term potential to grow your income and capital: Bank of Nova Scotia (TSX:BNS).
Let me explain why this isn’t just a yield trap. With interest rates pulling back, traditional savings accounts and guaranteed investment certificates (GICs) offer around 3% or less — hardly enough to preserve purchasing power, let alone grow wealth. That’s where reliable, dividend-paying blue-chip stocks come in.
Bank of Nova Scotia, or Scotiabank, has been somewhat of a laggard compared to other Canadian banks over the last several years. But sometimes the underdog offers the best value. Currently trading at around $76 per share, it sports a blended price-to-earnings (P/E) ratio of approximately 11.3, which is in line with its long-term historical average. That means it’s fairly valued — not overpriced like many other income stocks today.
A turnaround in the making?
Under new chief executive officer CEO Scott Thomson, Scotiabank is refocusing its strategy on key markets: Canada, the United States, and Mexico. This North American emphasis could serve as a springboard for growth over the long run.
While growth won’t happen overnight, investors with a time horizon of three to five years or longer could be well rewarded for their patience. You’re essentially being paid 5.8% annually to wait — and that income stream is backed by one of Canada’s largest and most established financial institutions.
A solid holding for income investors
For long-term investors building a diversified portfolio with an eye on income, Scotiabank deserves serious consideration. Its dividend is not only high but covered by earnings, and its history of paying and raising dividends stretches back over a century. Few companies in Canada can claim that kind of stability.
If you’re like me and looking to lock in attractive yields before rates fall further, this is an opportune time to buy. Even better, keep an eye out for broader market pullbacks — any dip in the share price means a chance to boost your yield even more.
In short, I’m all-in on Scotiabank. Between the juicy dividend, fair valuation, and turnaround potential, this blue-chip stock checks all the boxes for income-focused investors like me. Whether you’re just starting your dividend journey or adding to a mature portfolio, BNS might be the income engine you’ve been looking for.
