Tuesday, January 21, 2014

Bank of Nova Scotia 2

I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS). This is one of the big banks of Canada. All our big banks are dividend growth companies.

Over the past year in insider trading, there is some $53.7M in insider selling and $0.4M in insider buying. Net insider selling is at $53.3M. There are a lot of officers with options under this bank (some 17 pages in the insider trading report I looked at). There are not only options, but Rights Performance Share Units, Rights Deferred Stock Units and Rights Director Deferred Stock Units. There is also an Employee Stock Option Plan (ESOP).

The 5 year low, median and high median Price/Earnings Ratios are 10.29, 11.32 and 13.20. The current P/E Ratio is 11.74 based on 2014 EPS estimate of 5.49 and a stock price of $64.43. This stock price test says that the stock price is reasonable.

I get a Graham Price of $60.02. The 10 year low, median and high Price/Graham Price Ratios are 1.00, 1.14 and 1.28. The current P/GP Ratio is 1.07. This stock test says that the stock price is reasonable.

The 10 year Price/Book Value per Share Ratio is 2.31. The current P/B Ratio is 2.21, a value 95% of the 10 year ratio. This stock test suggests that the stock price is reasonable.

The 5 year median dividend yield is 4.10% and the current dividend yield is some 6% lower at 3.85%. It is better that the current dividend yield is higher than the 5 year median, but they are only 6% off, so the stock price is probably reasonable. If you look at the historical average dividend yield it is 3.74% a value 3% lower than the current dividend yield. This stock test suggests that the stock price is rather reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. The 12 month stock price consensus is $68.50. This 12 month stock price implies a total return of 10.17% with 3.85% from dividends and 6.32 from capital gains.

This bank was in MPL Communication Daily Buy and Sell Advisor's 6-Pak Approach for 2013 and their Canadian Dozen for 2014. An December 2013 article on 5 stocks to buy and hold in the G&M by John Heinzl gives this stock as one of the picks. There is an article in Forbes saying that this bank is over oversold. (If you do not know what this means, it means that a stock has recently been beaten down and it is time to buy it.)

I think that this bank and the others are selling at reasonable prices and are good for a long term buy. However, we still have financial problems in our economics and this is not going to be resolved anytime soon. See my spreadsheet at bns.htm.

This is the second of two parts. The first part was posted on Monday, January 20, 2014 and is available here.

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 Scotia Bank.

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 or StockTwits.

1 comment:

  1. Love BNS. Would like to own more shares but I own enough to DRIP synthetically.

    I can see myself ever selling it unless they cut their dividend.