Why Scotiabank May Not Be As Great As You Think

Summary
  • Bank of Nova Scotia is Canada’s most international bank with a focus on the Pacific Alliance countries.
  • In the past 10 years, the bank’s earnings-per-share growth versus its share count growth was pretty poor compared to its peers.
  • The stock has underperformed its peers but has outperformed the market.
  • Scotiabank’s dividend yield of 4.7% is safe, and you can expect stable dividend growth from the bank.

As the third-largest Canadian bank by market cap, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) or Scotiabank is often viewed as a blue-chip dividend growth stock. However, it may not be as great an investment as you think.

First, here’s an overview of the bank.

Business Overview of Bank of Nova Scotia

Scotiabank is Canada’s most international bank, but it still generates about half of its earnings from Canada. Its Canadian Banking segment is secure and generated the highest return on equity (“ROE”) of 22.7% in fiscal 2018 compared to the ROE of 14.4% and 16%, respectively, for its International Banking segment and its Global Banking and Markets segment. The overall ROE was decent at 14.9%.


Scotiabank’s Canadian business is a stabilizer that secures its core earnings, while it aims to drive growth outside the country. Specifically, you can see that it has a focus on the Pacific Alliance countries (“PACs”): Chile, Colombia, Mexico, and Peru.

Growing in the Pacific Alliance Region

Over the past four years, Scotiabank increased its earnings by more than 70%…

Unfortunately, I can only post an excerpt, but you can read the full article at Why Scotiabank May Not Be As Great As You Think

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Disclosure: At the time of writing, the author owns TSX:BNS shares.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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