It’s a great time to think about lower-beta dividend stock picking, especially if you’ve already taken some profits off the hyped AI trade, which has shown increased wobbles in recent months. Indeed, we’ve heard a lot of scary commentary from some of the brightest minds in artificial intelligence (AI).
From automating roles to the unacceptably high extinction risk, it’s really hard to make out where the trade is headed, especially since frontier model makers might not get the regulations that they’re calling for.
Any way you look at it, there’s just risk and uncertainty all around. So, what’s an investor to even do? While investing in AI could still be a wise move, investors should brace for extreme choppiness in both directions, especially if a regulatory pause causes some kind of implosion in the AI trade and perhaps a mild recession.
Even without regulations, I think the semiconductor names could certainly use a drawdown. Either way, there’s nothing wrong with a digestion period, even if it means suffering a bit of indigestion or even a cathartic puke to remove the weaker hands from a momentum trade that’s been the talk of the town for some number of years now.
In any case, dividends and predictable earnings streams could be about to come back in fashion again. And one dividend stock that Canadians ought to have at the top of their radar is the Canadian banks. Most notably, I view Bank of Nova Scotia (TSX: BNS) as one of the names that Canadian dividend hunters may have thought about picking up amid recent strength in the Big Six basket.
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So, what’s so enticing about shares of Bank of Nova Scotia compared to the other Big Six?
In my view, just about any Big Six bank is a fantastic long-term investment that will pay nice, growing dividends. In a way, they’re like a fine wine that gets better with age as the annual dividend hikes add up.
What’s most remarkable about the $158 billion Bank of Nova Scotia, however, is the slightly more attractive 3.6% dividend yield and the much lower price of admission, with shares currently going for 16.9 times trailing price-to-earnings (P/E). For those investors wondering if there’s still value to be had in the bank trade, I think one doesn’t have to look all too far.
With Bank of Nova Scotia pretty much winning the latest earnings season, with shares rocketing to new highs while the other six banks encounter a bit of volatility, I think that Bank of Nova Scotia stands out as a name that could be headed for a big re-rating to the upside. Expectations were rather high for the big banks, but only Bank of Nova Scotia was able to make a statement.
Even at close to $130 per share at a fresh high, I still think the stock is too cheap, especially as the former relative laggard has its moment to shine. As the bank moves away from the riskier, choppier emerging markets, my guess is that we should all come to expect to pay more for the name.
