Recent Buy – Bank of Nova Scotia

Scotiabank

Another purchase in my portfolio to close out this quarter. I added to my position in Bank of Nova Scotia (BNS.TO) with 20 shares @ C$65.65. The stock yields 4.15% adding C$54.40 to my annual dividend income.

Recent Buy Decision

  • Bank of Nova Scotia is the third largest financial institution in Canada – one of the oldest and most prestigious banks, which has rewarded shareholders extremely well through the decades.
  • BNS has the second longest dividend payment streak in Canadian corporate history – without a single miss in dividends since 1832!
  • BNS is the most international of the Canadian banks – with exposure in 55 countries outside Canada. More recently, the bank shed some assets/jobs in South America and has been expanding in Mexico – buying operations from Citigroup, and also in talks to buy operations from HSBC.
  • The Canadian financial sector has been under pressure due to the energy market turmoils facing the economy. While this effected the oil, gas and rest of the commodity markets – which has a heavy weighting in the Canadian market, the financials also suffered. Bank of Nova Scotia (and other Canadian banks) have traded sideways through the year – and as I mentioned in this post from Feb 2015, the pressure through 2015 should provide decent investment opportunities and recommended investors to keep adding shares as the long term prospects of these banks are undeniably bright.
  • My full dividend stock analysis (from Oct 2014) can be found here. BNS is still one of the most undervalued companies in the Canadian banking sector.

Risks

  • The Canadian economy facing a recession after the oil rout saw the Bank of Canada pre-emptively cut the interest rates in Jan 2015. The headwinds still exist for the Canadian economy, although the central and eastern provinces have taken up the slack from Alberta.
  • There has been talk of a Canadian housing bubble for a few quarters now, with Canadian borrowers tapped out at a 163% debt-to-income ratio. If the bubble bursts, Canada and the banking sector will face more problems.
  • BNS faces challenges in the emerging markets, and the bank has had to shut down operations and cut jobs to cope with the issues.

Valuation

BNS-FastGraphs

Further Reading

Full Disclosure: Long BNS. My full list of holdings is available here.

31 thoughts on “Recent Buy – Bank of Nova Scotia

  1. I just read that DivHut bought up the Canadian banks, and now you too. It seems all the dividend investors are turning their eyes north. Maybe I should, too, but I’m looking to average down on HSY and NSC whenever I get the capital (some month from now).

    Definitely a good buy!

    Sincerely,
    ARB–Angry Retail Banker

    • DivHut and I seem to be aligned and eying the same stocks – both he and I have been picking up shares in Canadian banks and healthcare REITs.

      Good picks there, ARB. I am turning my attention to the railroads after the recent correction. I will be waiting to see where they bounce off of, instead of trying to catch the falling knife.
      Best wishes
      R2R

  2. Hey R2R,

    Awesome purchase man. BNS is a solid buy… I hope to add to my position in the future too but find myself slightly paralyzed when overlooking the incredible amount of opportunities out there.

    Best regards
    DB

    • I hear you, DB. There are some companies which are really well priced and I am looking forward to some of the purchases in the coming weeks. I am sitting on some cash and dont want to move and put all of it in and want to see how far this downturn will take us.

      cheers
      R2R

  3. Got to love that dependable $54 in dividends and growing! BNS definitely has that international exposure which makes the bank pretty desirable, although they’ve run into some trouble in the past few months with their Caribbean operations.

    • Hey DW,
      Dividends from BNS are as reliable as they come. Im sure that dividend will continue growing over the coming years and decades.

      Yeah…BNS took some writedowns and shut some operations and cut jobs in South America. But they are also expanding their operations in Mexico – they bought out the Citigroup retail banking business and are in talks with HSBC to buy their Mexico operations. The Mexican economy is doing much better and is expected to perform well – so, I think they are making a good choice there (co-incidentally, AT&T – another one of my holding just announced investing $3B in Mexico to expand their footprint).

      cheers
      R2R

  4. As I thought, better off buying BNS than WFC! Both are good banks, but since you’re from up North, it makes sense. The only thing that would spook me is the possible housing bubble. I have read, for quite some time, about how much people are taking out to buy homes. Reminds me of what the US went through. I truly hope that is not the case. In any matter, I think you did your homework and made a solid choice here.

    – HMB

    • HMB,
      Yeah…theres a lot of comparison to what happened in the US. It was a nervous time for us last year when we were trying to decide whether we want to buy a house or keep renting. Eventually we decided to buy – since we are at a point of life where we needed more space and we could afford it. Time will tell if we bought at the market top. Anyway, the financial sector are looking great and Im glad to add some more shares in this great company. You did a great job with picking WFC – I need to revisit to see the valuation. I havent bought WFC in a couple of years…it may be time to add more.

      Thanks for stopping by
      R2R

  5. There’s a lot more opportunities now in the markets. Financials, REITs, railroads, and energy are looking pretty good across the board. I’d love to be adding a lot more capital into the current market but unfortunately it’s a bit light at the moment. I only have a starter position in BNS and while I’d like to try and build up positions more I also want to take advantage of the CDN bank undervaluation to add another one. I need to tear through the banks again to see which to add but I’m leaning towards TD currently. Besides BNS which one do you think is the best value right now?

    • You are right, JC. Lots of good opportunities out there. BNS is probably the most undervalued of the lot and the other one that I would look at is TD. These are the two companies that I own. However, the other big banks are also attractive – RY, BMO and CM. If you are looking for higher yield – check CM. Its the smallest of the Big Five, but the financials are great!

      R2R

  6. eldee says:

    hi r2r…another great choice….
    I thought you once owned this before in your portfolio, perhaps sold and re-entered ? ….

    Question,
    when you buy below market lot size I.e. BNS,, do you put in a order at market price or a price limit and wait?

    Is it hard to get an ordered filled on a very liquid equity with only 20 shares at a time ?

    Many thanks !… Good luck and happy investing

    • Hi eldee,
      I used to own a DRIP plan with BNS – which I started in 2013, and thought that things moved too slowly and didnt give me enough control – so I sold those and moved the money to my TFSA and started off with a position of 25 shares. This addition brings my total to 45 shares. Most of transactions usually range in the $1500 value – as that gives me decent amount of time for cash to accumulate and I am not making huge transactions at one price point. I can average down if its in a downtrend (I would also end up average up if stock prices are going up though).

      I was hoping to wait until I had enough cash to buy 25 shares this time around, but wanted to finish the purchase before the ex-date next week – so I decided to go ahead and buy 20 shares in this transaction. Most of cash holding as shown in my portfolio page is in other accounts (RRSPs). Its not hard to get the order filled with 20 shares at all. As for the type of order – once Ive decided, I put in an order a few cents below market price – I dont know why I do that..I should just buy at market price once Ive made up my mind. Old habit I guess 🙂

      R2R

  7. R2R,

    One of my favorite banks. About as consistent as they come. I’m thinking of actually adding to either TD or BNS in July. We’ll see if I have the cash for that.

    Glad to be a fellow shareholder!

    Best regards.

    • Those are the two banks I own as well in the Canadian financial sector. Really strong banks that have done well and will do well for years to come.

      Looking forward to seeing which ones you pick for your next investment

      Best wishes
      R2R

  8. Canadian and EU stocks should be on all American’s rata. Right now the Canadian and the Euro is soft, however, when they are strengthen up 🙂 it would be an immediate 10-40% return regardless the stocks earn money or not.

    • Thats a good point, Vivianne. I have definitely seen the advantage of investing in the US stocks for the last 5-6 years from this side of the border – when the Canadian dollar was on par with the US$.
      Good time for Americans to invest internationally, no doubt.

      R2R

  9. Nice purchase, R2R! I’m a big fan of this valuation and can’t wait to see what happens in the next few years as a fellow shareholder. Cheers!

    • BNS will continue to pay those dividends and keep them growing…thats my prediction 🙂 Reliability of dividends – doesnt get any better than banks like BNS.
      Good to have you as a fellow shareholder

      cheers
      R2R

  10. eldee says:

    BNS down 3.25% today due to $349 million Greece investment exposure.
    More than other Canadian banks.
    Short term noise, long term BNS should do well.
    I am not worried about this noise……I was a buyer of BNS today and also of TD.
    Good opportunity to buy today when there is fear on the street.
    Saving some $ for tomorrow to deploy on further dips.

    • Same here, eldee. This is a good long term opportunity to load up on BNS (and other Cdn banks). I wish I had more cash avail in my TFSA account…hopefully if this level holds I will add more.
      Some insurance names are also down – POW.TO is down quite a bit..and couple of other ones on my watchlist MFC and SLF are also considerably down.

      R2R

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