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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Bank of Nova Scotia in Focus
Bank of Nova Scotia (BNS) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 1.59% since the start of the year. Currently paying a dividend of $0.79 per share, the company has a dividend yield of 4.34%. In comparison, the Banks - Foreign industry's yield is 2.69%, while the S&P 500's yield is 1.34%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.16 is up 10.6% from last year. In the past five-year period, Bank of Nova Scotia has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.18%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bank of Nova Scotia's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BNS expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $6.63 per share, with earnings expected to increase 6.08% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BNS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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Bank of Nova Scotia The (BNS) : Free Stock Analysis Report
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