Bank of Nova Scotia (TSX:BNS) has had its fair share of challenges over the past year. Yet for long-term income seekers, that’s exactly why it might deserve a closer look. Shares have climbed 25% over the last 12 months yet still offer a yield north of 5.6%, making it one of the most generous dividend payers among Canada’s Big Six banks. The recent earnings tell a story of resilience in some areas and weakness in others. This creates a situation where patient investors could lock in attractive income and wait for the growth side of the equation to improve.
Into earnings
In the second quarter of 2025, Scotiabank reported net income of $2.03 billion, down slightly from $2.09 billion a year earlier, with diluted earnings per share (EPS) falling to $1.48 from $1.57. Adjusted numbers were a touch better but still showed year-over-year declines. The biggest drag came from Canadian Banking, where earnings dropped 31% due to a jump in provisions for credit losses and margin compression.
This was partly offset by strength in International Banking, which posted a 7% gain in adjusted earnings thanks to lower credit losses and improved productivity. Furthermore, Global Wealth Management grew earnings by 17% on higher fees and net interest income. Global Banking and Markets also chipped in with a 10% increase on strong capital markets performance.
The key pressure point is credit risk. Provisions for credit losses rose sharply to $1.4 billion from $1 billion a year ago. This reflects a deterioration in macroeconomic conditions across Canada, the U.S., and Mexico, and ongoing uncertainty related to U.S. tariffs. Much of the increase was in performing loan provisions, as the bank built buffers against potential future defaults. While this dents short-term profitability, it also shows a conservative approach to risk management that should help protect the balance sheet if the economic slowdown worsens.
Looking ahead
Despite these headwinds, Scotiabank’s capital position remains strong, with a Common Equity Tier 1 ratio of 13.2%, well above regulatory minimums. Management also raised the quarterly dividend to $1.10, a 4% increase. Over the past five years, Scotiabank’s dividend yield has averaged above 5.6%, and while payout ratios have crept higher, the bank’s consistent earnings power and robust capital base make the dividend appear sustainable.
Looking back over the past year, the dividend stock saw a notable recovery from its 52-week low of $62.47, hitting a recent high just over $80 before settling in the high $70s. That bounce reflects investor confidence that the worst of the earnings pressure may be behind it. With the forward price/earnings (P/E) at just over 10, the valuation is hardly stretched, especially for a bank with Scotiabank’s international diversification and income appeal.
For income investors, the trade-off is clear. In the short term, earnings growth is likely to be modest as the bank continues building reserves and managing through economic uncertainty. But for those focused on lifetime income, locking in a yield above 5.6% from a well-capitalized, globally diversified bank is compelling. Over time, as provisions normalize and revenue expands, that dividend could grow steadily, compounding total returns. Even now, a $7,000 investment can bring in around $391 annually.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| BNS | $77.94 | 89 | $4.40 | $391.60 | Quarterly | $6,935.66 |
Bottom line
Scotiabank may not be the flashiest stock on the market right now, but its combination of a high yield, strong capital ratios, and a conservative approach to risk makes it a solid anchor in a long-term portfolio. For investors willing to look past the near-term noise, this could be one of the better opportunities to secure dependable income for years to come.
