Bank of Nova Scotia

Sound bite for Twitter and StockTwits is: Dividend growth bank. Stock price is reasonable to expensive. It may be on the expensive side but not overly so. This stock has great long term total return with the one for 30 years at 16.60% per year. See my spreadsheet on Bank of Nova Scotia.

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. Besides, my son owns shares in this bank.

The dividend yields are moderate to high and the dividend growth is low to moderate. The current dividend yield is 3.85%. The 5, 10 and historical dividend yields are higher at 4.12%, 4.15% and 4.11%. Dividend growth over the past 5 and 10 years has been low with growth at 6.9% and 5.8% per year. Dividend growth was better longer term with dividend growth for the past 15, 20, 25 and 30 years at 10%, 11.1%, 10.4%, and 9.9% per year.

I think that dividend yields of 4 and 5% are high. If dividends are at 6% or above you have to consider the possibility that the company is in financial problems. In fact any time a stock's yield gets way above where it normally is, you have to look for financial problems.

The 2008/9 crisis hit banks hard. This bank only had one year of not rising dividends in 2010, but dividend increases have also been much lower since then than they had been in the past. They were through a period from 2000 to 2007when dividend increases were high (that is over 15%). However, they were lower before that period and after.

They can afford their dividends as the Dividend Payout Ratio is for 2017 at 47% with the 5 year coverage of DPR at 47.3%. The basic rule of thumb is that banks DPR should be from 40% to 55%.

I have total returns for this bank over the past 30 years. The total returns for the past 5, 10, 15, 20, 25 and 30 years is at 11.25%, 8.64%, 12.08%, 12.04%, 15.91% and 16.60% per year. Total returns include both dividends and capital gains. These values are determined using December 31 values. This total return calculation is compounded. The lowest is for the past 10 years and that is because it includes the difficult period of 2008/9.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.29, 11.32 and 12.52. The corresponding 10 year Ratios are 10.47, 11.47 and 12.97. The corresponding historical ones are 10.29, 11.25 and 13.20. They are pretty consistent. The current P/E Ratio 12.86, based on a stock price of $82.11 and 2018 EPS estimate of $6.39. This stock price testing suggests that the stock price is relatively reasonable but above the median and getting very close to expensive.

I get a Graham price of $81.51. The 10 year low, median and high median Price/Graham Price Ratios are 0.85, 0.93 and 1.05. The current P/GP Ratio is 1.01 based on a stock price of $82.11. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year Price/Book Value per Share Ratio is 1.88. The current P/B Ratio is 1.78 based on Book Value of $55,454M, Book Value per Share of $46.24 and a stock price of $82.11. The current P/B Ratio is some 5% below the 10 year median. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The historical median dividend yield is 4.11. The current dividend yield is 3.85% based on dividends of $3.16 and a stock price of $82.11. The current dividend is some 6.4% below the historical yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 3.30. The current ratio is 3.42 based on 2018 Revenue estimate of $28,775M, Revenue per Share of $23.99 and a stock price of $82.11. The current ratio is 3.7% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analysts' recommendations, I find Strong Buy (3), Buy (10), Hold (1) and Underperform (1). The consensus would be a Buy. The 12 months stock price is $89.71. This implies a total return of $13.10 based on a stock price of $82.11. This total return consists of capital gains of 9.26% and dividends of $3.85%.

Andrew Walker of Motley Fool thinks that this would be a great addition to a TFSA retirement fund. Ploutos Investing on Seeking Alpha does an analysis of this stock. Lisa Williams on Marea Informative gives an interesting view about the attention being paid to this bank. See what analysts are saying onStock Chase. Most mention that this bank is doing business in South America.

Bank of Nova Scotia is an international bank and a financial service provider. The company provides personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets services. Its web site is here Bank of Nova Scotia.

The last stock I wrote about was about was Toronto Dominion Bank (TSX-TD, NYSE-TD)... learn more. The next stock I will write about will be National Bank of Canada (TSX-NA, OTC-NTIOF)... learn more on Wednesday, January 17, 2018 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks Changes 2017... learn more on Tuesday, January 16, 2018 around 5 pm.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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