The Canadian equity markets have rebounded strongly from their March lows, with the benchmark S&P/TSX Composite Index climbing 9.3% since then. However, elevated energy prices, persistent inflationary pressures, and the lack of progress in peace talks between the United States and Iran continue to weigh on the broader economic outlook.
Given this uncertain environment, investors should remain selective while investing through their Tax-Free Savings Account (TFSA). A sharp decline in stock prices, followed by panic selling, could result not only in capital losses but also in the permanent erosion of valuable TFSA contribution room. Against this backdrop, high-quality dividend stocks with resilient business models, reliable payouts, and attractive yields can help investors generate stable returns while reducing overall portfolio risk.
With that in mind, let’s evaluate the business outlook, recent financial performance, growth prospects, and dividend sustainability of Bank of Nova Scotia (TSX: BNS) to determine whether the stock currently presents a compelling buying opportunity for long-term TFSA investors.
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BNS’s business outlook
ScotiaBank offers a broad range of personal, commercial, corporate, and investment banking services across Canada, Latin America, the Caribbean, and the United States. Its diversified revenue streams and international presence help reduce the impact of market volatility, economic cycles, and broader macroeconomic pressures on its financial performance. Supported by stable earnings and healthy cash flows, the bank has paid uninterrupted dividends since 1833. It has also increased its dividend at a 10-year annualized growth rate of 4.7% and currently offers an attractive forward dividend yield of 4.2%.
The bank also delivered solid first-quarter results in February, with adjusted earnings per share (EPS) and adjusted return on equity (ROE) rising 16.5% and 13%, respectively. Growth across all four operating segments supported the strong financial performance.
Meanwhile, Scotiabank’s Common Equity Tier 1 (CET1) capital ratio improved by 10 basis points to 13.3%, driven mainly by earnings growth and the divestiture of its operations in Colombia, Costa Rica, and Panama. However, these gains were partly offset by higher risk-weighted assets resulting from changes to the model and methodology, as well as share repurchases. With a strengthened balance sheet and improving profitability, let’s now examine the bank’s future growth prospects.
BNS’s growth prospects
Looking ahead, ScotiaBank is focusing on expanding its lower-risk, higher-margin North American operations while reducing exposure to its riskier Latin American markets. This strategic repositioning could support more stable earnings growth and improve the consistency of its cash flows over the long term.
The bank could benefit from its 14.9% stake in KeyCorp, which could contribute $77 million to its second-quarter net income. Excluding the amortization of acquired intangible assets, the adjusted net income contribution could be $85 million.
In addition, Scotiabank launched a new share repurchase program last month, authorizing the buyback of up to 15 million shares between April 7, 2026, and April 6, 2027. These repurchases could reduce its outstanding share count by approximately 1.2%, thereby boosting earnings per share and enhancing shareholder value.
Meanwhile, persistent inflationary pressures could lead central banks to delay interest rate cuts, which may benefit the bank’s core lending operations by supporting its net interest margin (NIM). However, a prolonged high-interest-rate environment could weigh on its wealth management business. Overall, Scotiabank’s long-term growth outlook appears solid.
Investors’ takeaway
Over the last 12 months, ScotiaBank has delivered an impressive total shareholder return of 55.6%, outperforming the broader equity markets. Despite this strong rally, the stock still trades at a reasonable valuation, with its forward price-to-sales and price-to-earnings multiples standing at 3.2 and 12.5, respectively.
Given its diversified operations, improving profitability, attractive dividend yield, and healthy long-term growth prospects, I believe Scotiabank could be a solid addition to a TFSA portfolio, especially amid the current uncertain economic environment.
