Thursday, June 5, 2008

Bank of Nova Scotia

This discussion is meant for educational purposes only, and not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

I follow this stock (TSX-BNS), but I do not have any for the simple reason I already have Bank of Montreal, Royal Bank and TD Bank. This is the only one that currently anyone has a buy rating on. It is a very good bank.

The dividend yield on this bank is slightly above average at 3.8% today, when the 5 year average is 3.22%. The market obviously likes this stock better than the other banks. The average annual dividend increases over last 5 years average 19%. This is excellent. However, I expect all Canadian Banks will slow down in dividend increases at least for this year and maybe next.

Both revenue and earnings per share are increasing nicely on this stock. The Price/Earnings Ratio (P/E), both current and trailing is slightly lower than the 5 year average. The trailing P/E is using current price, but last year’s earnings. In getting a current P/E there is some guess work, so it is handy to also look at the trailing P/E compared to the last 5 year average for the trailing P/E.

When comparing this bank’s chart to the S&P/TSX Composite, it has done a lot better than the other banks, and it is not so far off the TSX composite index. It has done much better than the S&P/TSX Capped Financials index. When deciding to buy a stock or not, it is handy to compare it to the general index and the index for its stock category. If it has done much worse, especially matching it to its category index, you are best to find out way before investing.

See my spreadsheet at See my website at

BNS is a bank. They offer personal and corporate banking and wealth management, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. It is an international bank having banking in Canada and some 40 other countries around the world in the geographic regions of the Caribbean and Central America, Mexico, Latin America and Asia.

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