Is it a good company at a reasonable price? It is one of the big banks in Canada. It is a dividend growth company. Which is what I like. It seems to be having problems now, but it will probably do well in the longer term. The current price seems to be in the cheap range. On Stock Chase, analysts do not seem to like this bank as well as the others, but they do think it will be fine in the long term.
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.
When I was updating my spreadsheet, I noticed total return for this bank was under 8% for the last 15 years. See chart below. This is different from the other banks I reviewed so far. Bank of Montreal was under 8% total return for the last 5 years only, as was the Toronto-Dominion Bank. Royal Bank of Canada had all Total Returns for all years above 8%.
If you had invested in this company in December 2012, for $1,034.28 you would have bought 18 shares at $57.46.43 per share. In December 2022, after 10 years you would have received $567.34 in dividends. The stock would be worth $1,194.12. Your total return would have been $1,763.46.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $57.46 | $1,034.28 | 18 | 10 | $569.34 | $1,194.12 | $1,763.46 |
If you had invested in this company in December 1997, for $1,010.40 you would have now 60 shares at cost of $16.84 per share. In December 2022, after 25 years you would have received $3,053.40 in dividends. The stock would be worth $3,980.40. Your total return would have been $7,033.80.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $16.84 | $1,010.40 | 60 | 25 | $3,053.40 | $3,980.40 | $7,033.80 |
If you had invested in this company in December 1988, for $1,001.81 you would have now 274 shares at a cost of $3.66 per share. In December 2022, after 33 years you would have received $14,644.62 in dividends. The stock would be worth $18,177.16. Your total return would have been $32,821.78.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $3.66 | $1,001.81 | 274 | 33 | $14,644.62 | $18,177.16 | $32,821.78 |
The dividend yields are good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 6.13%. The 5 year median dividend yield is also good at 5.12%. The 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 4.56% and 4.20%. The dividend growth is low (below 8%) at 5.9% per year over the past 5 years. The last dividend increase was in 2022 and it was for 3%. Banks tend to give out more than one dividend increase in a year. The dividends were increased in 2022 by 12.8%. This was after no increase in 2021. (The Canadian banks did not do increases in 2021.)
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 is 51% with 5 year coverage at 52%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 48% with 5 year coverage at 51%. I cannot calculate the DPR for Cash Flow per Share (CFPS) because of negative Cash Flow. (Cash Flow is not considered significant for banks.) The DPR for Free Cash Flow (FCF) for 2022 is 28% with 5 year coverage at 34%. (However, there is no agreement on what the FCF is.)
Debt Ratios are fine. Because this is a bank, I am looking at Deposit Debt/Covering Assets Ratio and for 2022 it is good at 0.72. I have calculated a Liquidity Ratio for 2022 of 1.23, but Liquidity Ratio is not considered important for banks. The Debt Ratio is 1.06 and this is fine for banks.
The Total Return per year is shown below for years of 5 to 37 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 5.89% | 0.86% | -3.94% | 4.80% |
| 2012 | 10 | 6.37% | 6.49% | 1.45% | 5.05% |
| 2007 | 15 | 5.81% | 6.50% | 1.87% | 4.63% |
| 2002 | 20 | 9.00% | 10.06% | 4.73% | 5.33% |
| 1997 | 25 | 10.06% | 10.60% | 5.64% | 4.96% |
| 1992 | 30 | 9.59% | 14.65% | 8.38% | 6.28% |
| 1987 | 35 | 9.31% | 15.67% | 9.00% | 6.67% |
| 1985 | 37 | 8.95% | 13.90% | 8.22% | 5.68% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.82, 10.71 and 11.78. The corresponding 10 year ratios are 9.51, 11.03 and 12.78. The corresponding historical ratios are 10.29, 11.18 and 13.20. The current P/E Ratio is 8.49 based on a stock price of $69.62 and EPS estimate for 2023 of $8.20. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 8.72, 10.02 and 11.12. The corresponding 10 year ratios are 9.23, 10.85 and 12.11. The current P/AEPS Ratio is 8.37 based on AEPS estimate for 2023 of $8.32 and a stock price of $69.92. The current ratio is below the low ratio for the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $101.18. The 10-year low, median, and high median Price/Graham Price Ratios are 0.71, 0.82 and 0.96. The current P/GP Ratio is 0.69 based on a stock price of $69.92. The current ratio is below the low ratio of the 10 year median ratios. 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 1.51. The current P/B Ratio is 1.27 based on a stock price of $69.92, Book Value of $65,150M and Book Value per Share of $54.68. The current ratio is 16% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2023 of $59.60. This implies a ratio of 1.17 with a Book Value of $71,006M and a stock price of $69.92. This ratio is 23% below the 10 year median ratio. This stock price testing suggests that the stock price is cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.44. The current ratio is 4.90 based on Cash Flow per Share for the last 12 months of $14.22, Cash Flow of $16,943 and a stock price of $69.92. The current ratio is 10% below the 10 year median ratio. However, Cash Flow is not considered important for banks as it can often be negative.
I get an historical median dividend yield of 4.20%. The current dividend yield is 5.92% based on dividends of $4.12 and a stock price of $69.92. The current ratio is 41% above 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 4.56%. The current dividend yield is 5.92% based on dividends of $4.12 and a stock price of $69.92. The current ratio is 30% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 3.00. The current P/S Ratio is 2.44 based on Revenue estimate for 2023 of $33,958, Revenue per Share of $28.50 and a stock price of $69.92. The current ratio is 19% 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 probably cheap. The 10 year median dividend yield test says this. The P/S Ratio test is showing very close to cheap. Other testing is showing mostly cheap.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (1) and Hold (11). The consensus is a Buy. The 12 month stock price consensus is $78.17. This implies a total return of 18.20% with 12.28% from capital gains and 5.92% from dividends based on a current stock price of $69.92.
Some Analysts on Stock Chase are not very fond of this bank. Stock Chase give the bank 5 stars out of 5. Money Sense rates this stock a B. Aditya Raghunath on Motley Fool thinks this is a good passive income stock. Kay Ng on Motley Fool reviews all the banks and this bank does not make it into her top 4. The bank reports on their fourth quarter for 2020 via a Press Release on Newswire. There is a report on this bank by Bay Street. Simply Wall Street gives this stock 4 stars out of 5 and list no risk checks.
Bank of Nova Scotia is a global financial services provider. The bank has five business segments: Canadian banking, international banking, global wealth management, global banking, and markets, and other. It offers a range of advice, products, and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. 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 Wednesday, January 18, 2023 around 5 pm. Tomorrow on my other blog I will write about Personal Taxes 2022 .... learn more on Tuesday, January 17, 2023 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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