Banking on Stability: Canadian Banks With Consistent Dividend Yields

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk

Canada’s big banks are often regarded as some of the best long-term options on the market. There are plenty of good reasons for that view, including the consistent dividend yields they offer.

Here’s a look at one of those big banks and why it belongs as a core holding in your portfolio.

Here’s a bank to consider buying right now

The big bank for investors to consider buying right now is Bank of Nova Scotia (TSX:BNS). Scotiabank isn’t the largest of the big banks, but it does have a unique factor that sets it apart from its peers.

That factor is growth. Scotiabank has turned primarily to markets in Latin America for international growth. This runs contrary to its peers, who have leaned on the U.S. market for international growth. That’s part of the reason why the bank is often referred to as Canada’s most international bank.

Specifically, the bank turned to the markets of Mexico, Columbia, Chile, and Peru. Those four nations comprise a trade bloc known as the Pacific Alliance. The Alliance is tasked with improving trade and eliminating tariffs among its members.

Scotiabank’s growing branch presence in each member state has helped the bank become a familiar and trusted partner in the region. More importantly, emerging markets in Latin America can offer significantly higher growth opportunities for investors spanning decades.

And that growth opportunity helps fund that juicy, consistent dividend yield.

As an income stock, Scotiabank really shines

Of the main reasons why investors flock to Canada’s big banks, and Scotiabank in particular, is for the dividends. Scotiabank offers investors a quarterly dividend, which the bank has provided without fail for nearly two centuries.

Today, the yield on that dividend works out to an insane 7.48%, making it one of the better-paying Canadian Dividend Aristocrats on the market. To illustrate that juicy income potential, let’s consider an investment of $40,000 in Scotiabank.

For that investment (always as part of a larger, well-diversified portfolio), investors can expect to generate an income of just shy of $3,000. And perhaps best of all, investors who are not ready to draw on that income yet can choose to reinvest. This will allow a future income stream to grow until needed.

And let’s not forget that Scotiabank has an established cadence of providing annual upticks to that dividend. This helps solidify the bank as an investment with consistent dividend yields and an excellent buy-and-forget option.

Why is that dividend so high?

Scotiabank is a great long-term investment, but that yield may seem high for some investors. The reason for that is that the stock has dipped considerably over the past few years. Year to date, the bank trades down 14%.

It’s worth noting that much of the market is down right now, and that dip can be attributed to the interest rate hikes and market volatility we’ve seen over the past year. And while all of the big banks have seen their stock prices drop this year, Scotiabank has dipped further than its peers.

Part of the reason for that is Scotiabank’s exposure to markets in Latin America. Another more recent catalyst was the company’s recent fourth-quarter results announcement.

Earnings for that quarter are still just over a month out. Still, the bank noted several line items, including a restructuring charge, which includes a 3% workforce reduction and consolidation of real estate costs.

Is Scotiabank the consistent dividend stock for you?

Again, prospective investors should note that this recent dip isn’t just limited to Scotiabank’s stock. Instead, investors should look at this recent weakness as an opportunity to pick up a stellar stock that pays out a consistent dividend at an incredible discount.

As of the time of writing, Scotiabank trades near its 52-week low and boasts an incredible 8.87 price to earnings.

In my opinion, long-term investors should pick up shares of Scotiabank to add to any long-term portfolio.

The post Banking on Stability: Canadian Banks With Consistent Dividend Yields appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Bank of Nova Scotia?

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points.*

They just revealed what they believe are the 5 best stocks for investors to buy right now… and Bank of Nova Scotia made the list — but there are 4 other stocks you may be overlooking.

See the 5 Stocks
* Returns as of 10/10/23

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);

More reading

Fool contributor Demetris Afxentiou has positions in Bank Of Nova Scotia. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.