Tag Archives: TSX:BNS

5 Useful Tips for Successful Stock Investing

Some people think stock investing is gambling. It can be, but it doesn’t have to be. Stock investing won’t be gambling if it’s a sure win. There is a range of concepts you can apply to increase your odds of winning.

Here are some useful tips that can make stock investing a lucrative endeavour for you.

saving, investing, and compounding
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Don’t Lose Money

This is easier said than done. To avoid losing money when you invest in stocks, first familiarize yourself with the topics around what makes a good business, fundamental analysis, and valuing a company.

I find learning about technical analysis helps. But identifying great businesses and trying not to overpay for them comes first.

Many investors share their investing strategies or why they buy or sell a stock through blogs or forums.

For instance, my friend recently invited me to join a Facebook (NASDAQ:FB) group, which had a focus on dividend investing. Of course, if you have more time on your hands, pick up a bunch of books about specific investing topics from the library or Amazon (NASDAQ:AMZN).

A good book for new investors is The Single Best Investment by Lowell Miller with a focus on Creating Wealth with Dividend Growth.

You can follow the people or groups that share stock investing ideas or strategies that interest you and learn over time.

Soon, you’ll be itching to apply your knowledge. If you want a sure-fire way to not lose money, experiment with a virtual account. I bank with Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

It offers a virtual trading account in which I can buy or sell stocks on the Canadian and U.S. exchanges like in a real account, but it’s for practice only. It starts you off with $100,000-200,000 of virtual money.

Key Takeaway: Preserve your capital. You need money to invest to make you more money.

Blue sky with cloudy words saying change. Grass field in background.

Business Valuation Changes

In the previous section, I mentioned about valuing a company. If you’ve done some reading on stock investing already, you’ve probably heard that you don’t want to overpay for even the best of companies, including Johnson & Johnson (NYSE:JNJ), one of only two AAA-rated companies.

The most common valuation metric of a stock is the price-to-earnings ratio (P/E).

As of writing, Facebook trades at $162 per share and in 2018 it reported earnings per share of $7.57. So, its P/E based on trailing-12-month earnings is 21.4. However, its P/E was close to 60 when it first started trading. Facebook’s 2019 earnings are estimated to remain stable compared to 2018’s. That’s why the stock is trading at a lower P/E. Longer term, Facebook is currently estimated to increase its earnings per share by more than 15% per year.

There are other things that can affect a business’ valuation, such as the debt levels of a company. If company A and company B are the same except that A has more debt than B, A will have a lower price tag than B.

Key Takeaway: Business valuations change as the underlying businesses change. Typically, lower anticipated earnings growth (or worse, negative earnings growth or a net loss) will cause stocks’ valuations to drop like a rock.

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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%.

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The Market is Spooked Out! But You Shouldn’t Be.

The U.S. and Canadian stock markets have declined about 8% and 9%, respectively, from their 52-week highs. They’re spooked out from the Halloween month!

Let’s take a step back and be objective. The U.S. market is still about 29% higher than three years ago. The Canadian market? About 12% higher. From five years ago, the U.S. market is 52% higher and the Canadian market is 15% higher.

SPY Chart

SPY data by YCharts. The 10-year price action of SPY and TSX:XIU

You get the big picture. The stock markets go up over the long term. Historically, it has always been money-making opportunities to buy quality companies on dips. And this dip is no different if you find great businesses to be attractively priced.

Here are some North American dividend-growth stocks that I find compelling today.

Undervalued Healthcare Stock

halloween

AbbVie (NYSE:ABBV) offers a safe 4.7%. Its payout ratio of less than 50% is sustainable.

Since AbbVie was spun off from Abbott Labs (NYSE:ABT) in 2013, it has increased its dividend every year thereafter. Its four-year dividend growth rate is 13.2%. Its trailing 12-month dividend per share is 40% higher than the previous 12 months.

The spooked market has brought AbbVie back into undervalued territory. At less than US$82 per share, it trades at a blended P/E of about 11. Analysts estimate the company will grow its earnings per share by at least 12% per year for the next three to five years. Read More