Is it a good company at a reasonable price? Dividend increases are low, but dividend is in the 5% ranges. There seems to be always a trade off between dividend increases and dividend yield. Analysts expect a small dividend increase this year (1.3%) after none last year. I personally like a total return of 8% per year and this bank has often not done this. The dividend yield is good, so maybe buy for passive income? The stock is testing as reasonable and below the median.
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 that most of the current top executives do not own shares in this bank. They do have options. Also, this bank did not do any dividend increase in the last financial year of 2024. Their financial year runs to October each year, so I am reviewing the financial year ending October 2024. Dividend went up in this financial year because dividends were raised during the financial year ending October 2023. Analysts do expect a dividend increase this year of around 1.3%.
If you had invested in this company in December 2014, for $1,060.96 you would have bought 16 shares at $66.31 per share. In December 2024, after 10 years you would have received $561.60 in dividends. The stock would be worth $1,234.04. Your total return would have been $1,796.64. This would be a total return of 6.38% per year with 1.53% from capital gain and 4.85% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $66.31 | $1,060.96 | 16 | 10 | $561.60 | $1,235.04 | $1,796.64 |
The current dividend yield is good with dividend growth low. The current dividend is good (5% to 6% ranges) at 5.72%. The 5 and 10 year median dividend yields are also good at 5.84% and 5.00%. The historical median dividend yield is moderate (2% to 4% 4anges) at 4.24%. The dividend growth is low (below 8% per year) at 4% per year over the past 5 years. The last dividend increase was in 2023 and it was for 2.9%. Since it occurred halfway through the year, the actual dividends received in 2024 were 1.4% higher than in 2023.
The Dividend Payout Ratios (DPR) need improving. The DPR for 2024 for Earnings per Share (EPS) is high at 72% with 5 year coverage at 60%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is high at 68% with 5 year coverage at 58%. I prefer to see this DPR in the 40% range. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 34% with 5 year coverage at 22%. The DPR for 2024 for Free Cash Flow (FCF) is good at 43% with 5 year coverage at 36%. There is no agreement on the FCF and there is a big disagreement.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 72.23% | 60.24% |
| AEPS | 65.53% | 58.02% |
| CFPS | 33.71% | 22.07% |
| FCF | 42.73% | 35.97% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2024 is 10.58 and currently at 10.30. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2024 which is good at 0.70 and currently at 0.70 because this is a more important one for a Financial. The Liquidity Ratio for 2024 is low at 1.05 and 1.05 currently. But this is not important for financials. If you added in Cash Flow after dividends, the ratios are fine at 1.22 and currently at 1.22. The Debt Ratio for 2024 is fine for a bank at 1.06 and 1.06 currently. The Leverage Ratios for 2024 are good at 4.4% and currently at 4.4%. The Debt/Equity Ratios for 2024 are ok at 15.79 and currently at 15.79.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.70 | 0.70 |
| Lg Term R | 10.58 | 10.30 |
| Intang/GW | 0.19 | 0.18 |
| Liquidity | 1.05 | 1.05 |
| Liq. + CF | 1.22 | 1.22 |
| Debt Ratio | 1.06 | 1.06 |
| Leverage Bk | 4.4% | 4.4% |
| Leverage | 16.79 | 16.79 |
| D/E Ratio | 15.79 | 15.79 |
The Total Return per year is shown below for years of 5 to 39 to the end of 2024. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 3.97% | 6.26% | 1.03% | 5.23% |
| 2014 | 10 | 5.18% | 6.38% | 1.53% | 4.85% |
| 2009 | 15 | 5.28% | 7.89% | 3.05% | 4.85% |
| 2004 | 20 | 6.98% | 7.82% | 3.25% | 4.57% |
| 1999 | 25 | 9.54% | 12.47% | 6.62% | 5.84% |
| 1994 | 30 | 9.35% | 15.17% | 8.49% | 6.68% |
| 1989 | 35 | 8.82% | 15.37% | 8.78% | 6.59% |
| 1985 | 39 | 8.60% | 13.90% | 8.21% | 5.70% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.82, 11.10 and 12.58. The corresponding 10 year ratios. are 9.30, 10.94 and 12.51. The current P/E Ratio is 11.08 based on a stock price of $74.18 and EPS estimate for 2025 of $6.70. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.47, 9.91 and 11.34. The corresponding 10 year ratios. are 8.72, 10.23 and 11.56. The current P/AEPS Ratio is 10.60 based on a stock price of $74.18 and AEPS estimate for 2025 of $7.00. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $96.51. The 10-year low, median, and high median Price/Graham Price Ratios are 0.63, 0.78 and 0.93. The current P/GP Ratio is 0.77 based on a stock price of $74.18. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Book Value per Share Ratio of 1.40. The current P/B Ratio is 1.25 based on a stock price of $74.18, Book Value of $473,590M, and Book Value per Share of $59.14. The current ratio is 10% 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 (BVPS) estimate for 2025 of $61.63. This implies a ratio of 1.20 based on a stock price of $74.18 and Book Value of $76,695M. This ratio is 14% below the 10 year median ratio of 1.40. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.05. The current P/CF Ratio is 5.90 based on a Cash Flow for the last 12 months of $15,652M, Cash Flow per Share of $12.58 and a stock price of $74.18. The current ratio is 17% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 4.24%. The current dividend yield is 5.72% based on dividends of $4.24 and a stock price of $74.18. The current dividend yield is 35% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 5.00%. The current dividend yield is 5.72% based on dividends of $4.24 and a stock price of $74.18. The current dividend yield is 14% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 2.82. The current ratio is 2.58 based on Revenue estimate for 2025 of $35,807M, Revenue per Share of $28.77 and a stock price of $74.18. The current ratio is 9% 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 reasonable and below the median. The 10 year median dividend yield test says this. It is confirmed by the P/S Ratio test. Most of the rest of the testing is finding the stock price reasonable and below or above the median.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (1), and Hold (8). The consensus would be a Buy. The 12 month stock price consensus is $80.67 with a high of $90.00 and low of $71.00. The 12 month stock price consensus of $80.67 implies a total return of 14.46% with 8.75% from capital gains and 5.72% from dividends.
The two analysts’ recommendations on Stock Chase for this bank in 2025 are a buy. Last year, it was a bit of a mixed bag with most at Buys, but some Sell and Holds. Stock Chase gives this bank 5 stars out of 5. Andrew Walker on Motley Fool says to buy for the attractive dividend and wait for its recovery. Demetris Afxentiou on Motley Fool thinks this is a bank to buy and hold forever. The bank put out a press release via Newswire about their fourth quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock and is not very keen on it. Simply Wall Street gives this stock 4 stars out of 5. They have no warnings out on this bank.
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. 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, 2025 around 5 pm. Tomorrow on my other blog I will write about Aeon Newsletter.... learn more on Thursday, January 16, 2025 around 5 pm.
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I would like to know how do you get the value "Covering assets" since it's a very important metric on financial institutions like banks. Thanks!
ReplyDeleteThe Covering Asset I used was wrong. The Ratio should be 0.70. It is assets $1,412,027-57,317 over Liabilities of the Deposits of $943,849.
ReplyDelete