Friday, January 18, 2013

Bank of Nova Scotia

I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS). I have been following this bank for some time even though I do not own it. I do not own this bank because I already own Bank of Montreal (TSX-BMO), Royal Bank (TSX-RY) and Toronto-Dominion Bank (TSX-TD). I initially built my portfolio on bank and utility stock.

Dividend growth over the past 5 and 10 years was at 3.63% and 11.11% per year. Dividends were increased twice in 2012 for a total increase of 9.6%. Not quite as good as the 10 year growth rate, but still a good increase. This bank also had level dividends in 2009 and 2010. This is why the 5 year dividend growth rate is so low.

The Dividend Payout Ratios are fine with the 5 year median at 50% for earnings and 34% for cash flow. The DPRs for 2012 came in at 40% and 34% and the DPR for earnings is expected to be at 42% in 2013 so there is some room for more increases. (See my site for information on Dividend Payout Ratios).

The total return for this stock over the past 5 and 10 years was at 6.47% and 12.36% per year. The capital gain portion of this total return was 2.71% and 8.12% per year over the past 5 and 10 years. The dividend portion of this total return was 3.76% and 4.25% per year over the past 5 and 10 years.

The outstanding shares have increased by 3.78% and 1.62% per year over the past 5 and 10 years. Increases have been due to DRIP, stock options and public offerings (for some acquisitions).

This bank has not had much in revenue or revenue per share growth. The revenue has declined over the past 5 by 4.9% per year. The revenue has grown by just 1.2% per year over the past 10 years. Revenue per Share has declined over the past 5 years by 8.4% per year. It has also declined over the past 10 years by 0.4%.

Other growth is better with Earnings per Share grown at 5.4% and 12.2% per year over the past 5 and 10 years. Cash Flow per Share has also grown at 8.5% and 7.6% per year and Book Value per Share at 11.3% and 8.3% per year over the past 5 and 10 years.

The return on equity is good for this stock. The ROE for the 2012 financial year was 18.3% and the 5 year median ROE is 17.1%. The ROE on comprehensive income is similar with the ROE for 2012 at 19.6% and the 5 year median ROE slightly lower at 16.7%.

The debt ratios are normal for a bank with the Debt Ratio at 1.07 and the Leverage and Debt/Equity Ratios at 18.95 and 17.78.

Investing in this bank for the long term would get you a very nice yield on your original investment. After some 20 years you might be looking at the over 30% range. Banks are very good at providing increasing dividend income over time. (See my site for information on dividend yields on original investments.)

As far as dividend increases go over the past 5 years, this stock was only better than BMO. Both RBC and TD did better, as did the National Bank. (I do not follow CIBC.) Their dividend increases were at, 3.6%, at least better than inflation.

You would buy this for dividends and capital appreciation. It would be a long term buy. However, it has not been good at growing revenue.

The Bank of Nova Scotia is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. It is an international bank having banking in Canada and some 40 other countries around the world in the geographic regions of the Caribbean and Central America, Mexico, Latin America and Asia. Its web site is here Scotia Bank. See my spreadsheet at bns.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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