Friday, December 23, 2011

Bank of Nova Scotia

I do not own this stock (TSX-BNS), but I have been following it for some time. This bank also only had dividends increases on hold for 2009 and 2010. They increased their dividends by 6.1% this year. This is one of the lowest increases for this bank that they have had for some time. The 5 and 10 year dividend growth is 6.45% and 12.7% per year, respectively.

As far as Dividend Payout Ratios goes, their 5 year median DPRs are 50% for earnings and 35% for Cash Flow. Their 10 year median DPRs are lower at 44% and 36%. Their DPRs for 2011 were 44% and 35% and therefore closer to the 10 year median. Their DPRs peaked in 2008 and have been coming down since. (See my site for information on Dividend Payout Ratios).

If you had held this stock over the past 5 and 10 years, you would have had a total return of 4.7% and 13.5% per year. Dividend portion of this return would have been 3.7% and 4.4%. The portion of this return attributable to dividends would be 80% and 32% respectively.

Revenues have been growing over the past 5 and 10 years at around 1.6%. This is low, but revenue growth for all Canadian banks has been low. Earnings have been growing over the past 5 and 10 years at 5.4% and 8.6% per year, respectively.

Cash Flow has been growing at 10.8% and 5.9% per year over the past 5 and 10 years. Book Value has been growing at 8.8% and 7.4%. Concerning the trouble this last recession has caused our banks, this is not bad.

The Return on Equity has always been good for this bank. The ROE for 2011 was 17.5% and the 5 year median was 17.1%. The ROE based on Comprehensive Income is a bit lower, but not significantly lower. The ROE for Comprehensive Income for 2011 was 16.2. However the 5 year median ROE based on Comprehensive Income is lower at 13.6. All these ROE are in the desirable 10 to 15% range.

The Asset/Liability Ratio is low at 1.06, but within typical range for a bank. The Leverage and Debt/Equity Ratios are a bit high at 20.27 and 19.10, but lower than the 10 year medians of 22.11 and 20.89. They are also pretty typical for a bank.

The basic reason I do not own this bank is that I have enough bank stock. I think it is better to own some, but not all, our banks. You can over diversify

I have made transfers from my RRSP accounts for this year. I therefore had a bit of money to invest and so bought some more shares in Ag Growth International (TSX-AFN) today. This is a stock I already own.

The Bank of Nova Scotia is a bank. They offer personal and corporate banking and wealth management services in Canada and US, 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. Its web site is here Bank of Nova Scotia. See my spreadsheet at bns.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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