Bank Of Nova Scotia: A Tempting 6.5% Dividend Yield

Summary

• The Bank of Nova Scotia is one of the Big Five Canadian Banks.
• With its focus on South America, the bank is facing bigger risks, but has also huge growth potential.
• Currently, the bank has one of the highest dividend yields among the major North American banks.
• Even when assuming moderate growth in the years to come, the stock is still undervalued, but I don't think we saw the bottom of this cycle yet.

Very recently, I published my article why banks could be a great long-term investment and, in this article, I will look in more detail at one of the Big Five Canadian Banks – the Bank of Nova Scotia (NYSE:BNS). Most banks have not been a great investment during the last decade and were struggling, but the Bank of Nova Scotia was also one of the underperformers in the last 10 years among the Big Five Canadian banks.

(Source: Pixabay)

In the following article, I will look at the growth potential of Scotiabank as well as the risks surrounding the bank. We will look at the dividend, which is pretty attractive, analyze why Scotiabank has a wide economic moat (like most other banks) and also offer an intrinsic value calculation to decide if the stock can be a good investment. But as always, we start with a short business description and short overview of second-quarter results.

Business Description

The Bank of Nova Scotia is a Canadian multinational banking and financial services company, which is serving more than 25 million customers around the world. It is one of Canada’s Big Five banks and at the end of 2019, the bank had 3,109 branches and offices and almost 102,000 employees (full-time equivalents). Bank of Nova Scotia currently has six core markets, from which about 87% of its earnings stem. These are Canada, the United States and the Mid- and South American countries Chile, Mexico, Peru and Colombia (the Pacific Alliance).

Aside from its home country and the United States, the Bank of Nova Scotia is especially present in Latin America. In Colombia, it is currently the 5^th largest bank according to loans and has a market share of 5.9%, and in Peru it is the 3^rd largest bank and has

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.