I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS), but my son does. This is one of the big banks of Canada. All our big banks are dividend growth companies. Next week, after reporting on CIBC, I will put together some tables comparing all the banks.
When I was updating my spreadsheet, I noticed lately the bank has not done lately as well as it has in the past. Total Return is under 8% per year over the past 5 years and dividend increases have slowed over the past 5 and 10 years.
The dividend yields have been in the moderate range (under5%) until recently as it has hit 5% a number of times in the last few years. The current dividend yield is just into the moderate range (below 5%) at 4.98%. The 5, 10 and historical dividend yields are 4.49%, 4.15% and 4.12%. The dividend increases are in the low range (under8%) per year over the past 5 and 10 years. They were higher in the past and in the moderate range. See chart below.
The Dividend Payout Ratios are probably fine, but not being able to calculate the 5 year coverage for CFPS is troubling. The DPR for EPS for 2019 is 52% with 5 year coverage at 49%. The DPR for CFPS for 2019 is 46%. The 5 year coverage cannot be calculated due to negative Cash Flows. The DPR for Free Cash Flow for 2019 is 288% with 5 year coverage at 46%. However, as I have noted before, FCF is different depends on what sites you look at.
Debt Ratios are fine. Since this is a bank, you do not look at a Debt/Market Cap Ratio, but coverage of long term liabilities by assets. The Debt/Coverage Asset Ratio is fine at 0.95. Liquidity Ratios are not important for banks. The Debt Ratio for 2019 is 1.07 and this is fine for a bank. The Leverage and Debt/Equity Ratios for 2019 are 15.47 and 14.47 respectively and are normal for a bank.
The Total Return per year is shown below for years of 5 to 34 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 6.39% | 6.48% | 2.04% | 4.44% |
| 2009 | 10 | 5.94% | 8.48% | 4.07% | 4.41% |
| 2004 | 15 | 8.00% | 8.16% | 4.00% | 4.15% |
| 1999 | 20 | 10.97% | 13.26% | 8.07% | 5.19% |
| 1994 | 25 | 10.46% | 15.88% | 10.05% | 5.82% |
| 1989 | 30 | 9.65% | 15.88% | 10.13% | 5.76% |
| 1985 | 34 | 9.29% | 14.29% | 9.30% | 4.98% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.01, 10.77 and 12.50. The corresponding 10 year ratios are 10.22, 11.30 and 12.51. The corresponding historical ratios are 10.29, 11.23 and 13.11. The current P/E Ratio is 9.72 based on an EPS estimate for 2020 of $7.44 and current stock price of $72.29. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $94.73. The 10 year low, median, and high median Price/Graham Price Ratios are 0.83, 0.90 and 0.99. The current P/GP Ratio is 0.76 based on a stock price of $72.29. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.79. The current P/B Ratio is 1.35 based on a Book Value of $65,198M, Book Value per Share of $53.61 and a stock price of $72.29. The current ratio is 25% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 4.12%. The current dividend yield is 4.98% based on dividends of $3.60 and a stock price of $72.29. The current dividend yield is 21% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 4.15%. With the current dividend yield at 4.98%, the current yield is 20% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 3.29. The current P/S Ratio is 2.71 based on 2020 Revenue estimate of $32,436M, Revenue per Share of $26.67 and a stock price of $72.29. The current P/S ratio is 18% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is cheap to reasonable. It is only the P/S Ratio test that is not showing the stock as cheap but 18% is close to cheap.
Is it a good company at a reasonable price? I think that all the Canadian Banks are good dividend growth stocks. This stock is selling currently at a reasonable price.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (3), Hold (9) and Sell (1). The consensus would a Hold. The 12 month stock price consensus is $77.73. This implies a total return of 12.51% with 7.53% from capital gains and 4.98% from dividends
See what analysts are saying about this stock on Stock Chase. Several talk about this high dividend yield. Kay Ng on Motley Fool also talk about its juicy dividend. A writer on Simply Wall Street thinks this bank is selling at a fair price. A writer on Simply Wall Street says there are potentially better dividend paying stocks than this one. Adam Othman on Motley Fool talks about why this bank is the best to buy in 2020. Rob Hiaasen on Riverton Roll thinks that BNS is a better bank to buy than Atlantic Capital Bancshares (NASDAQ-ACBI) and explains why.
Bank of Nova Scotia is known as Canada's "international bank" and is a global financial services provider. The bank has three business segments: Canadian banking, international banking, and global banking and markets. It is the third-largest bank in Canada. The bank's international operations span numerous countries and are more concentrated in Central and South America. 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 Friday, January 17, 2020 around 5 pm. Tomorrow on my other blog I will write about Credit Cycles.... learn more on Thursday, January 16, 2020 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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