Bank of Nova Scotia (TSE:BNS) Is Due To Pay A Dividend Of CA$0.90
The board of The Bank of Nova Scotia (TSE:BNS) has announced that it will pay a dividend of CA$0.90 per share on the 27th of October. Based on this payment, the dividend yield on the company's stock will be 4.5%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Bank of Nova Scotia
Bank of Nova Scotia's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Bank of Nova Scotia's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share is forecast to rise by 8.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.
Bank of Nova Scotia Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2011, the first annual payment was CA$1.96, compared to the most recent full-year payment of CA$3.60. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.8% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.8% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
Our Thoughts On Bank of Nova Scotia's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Bank of Nova Scotia is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Bank of Nova Scotia analysts we track are forecasting continued growth with our free report on analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
