Bank of Nova Scotia (TSX:BNS) recently hit a new record high. Investors who missed the rally 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 dividends and long-term total returns.
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Bank of Nova Scotia share price
BNS trades near $100.50 at the time of writing, compared to less than $64 during the April tariff rout.
The rebound is a welcome relief for shareholders who watched the stock underperform its peers for several years.
Bank of Nova Scotia is working through a strategy transition that will see the bank pivot its growth focus from Latin America to the United States and Canada. The process has already started. Bank of Nova Scotia recently received approval to sell its operations in Colombia, Costa Rica, and Panama, as announced earlier this year.
In 2024, the bank spent US$2.8 billion to buy a 14.9% stake in KeyCorp, an American regional bank. That deal has given Bank of Nova Scotia a good platform to expand its American presence.
The bank previously spent billions of dollars to acquire assets in Latin America, including Mexico, Peru, and Chile, where it still has large operations. There is good growth potential in these markets due to the low level of banking services penetration and the prospects of an expanding middle class. High costs, along with political and economic instability, however, have hindered the returns that investors expected from the multi-decade bets on the region.
Ongoing uncertainty in Mexico is expected until trade negotiations between the United States and its southern neighbour lead to some clarity on how the economic relationship will expand in the coming years. Chile is battling with crime issues and will elect a new president on December 14. Peru has been in political turmoil for most of the past decade and will have a new general election next spring after the recent impeachment of its leader.
Investors will need to keep an eye on Bank of Nova Scotia’s quarterly reports for indications of additional monetization plans in the international business. The stock sold off earlier this year when the Colombia deal was announced, due to the more than $1 billion hit Bank of Nova Scotia said it will take on the sale.
Upside
Bank of Nova Scotia is reducing operating expenses in the Canadian operations as it streamlines the business to make it more efficient.
The bank reported solid fiscal Q4 2025 results. Adjusted net income for the quarter came in at $2.56 billion compared to $2.12 billion in the same quarter last year. Return on equity (ROE) rose to 12.5% from 10.6%.
For the full fiscal year, 2025 adjusted net income was $9.51 billion compared to $8.63 billion. ROE increased to 11.8% from 11.3%, so the company’s numbers are moving in the right direction.
The bank finished the fiscal year with a common equity tier-one (CET1) ratio of 13.2%. This means Bank of Nova Scotia has ample capital to ride out an economic downturn or even make additional strategic acquisitions.
Dividend
Even with the large rally in the share price, investors can still pick up a solid 4.4% dividend yield from BNS today. That’s the highest yield available among the large Canadian banks.
Time to buy?
The broader market is due for a pullback, so investors should brace for some near-term volatility. That being said, Bank of Nova Scotia is making good progress on its turnaround efforts. As ROE rises, the market will be more comfortable giving the stock a higher multiple, so additional upside should be on the way over the medium term.
The stock isn’t as cheap as it was a few months ago, but BNS still deserves to be on your radar for a buy-and-hold dividend portfolio.
