Yahoo Finance Dividend Investors: Don't Be Too Quick To Buy The Bank of Nova Scotia (TSE:BNS) For Its Upcoming Dividend
Readers hoping to buy The Bank of Nova Scotia (TSE:BNS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 5th of April to receive the dividend, which will be paid on the 28th of April.
Bank of Nova Scotia's next dividend payment will be CA$0.90 per share. Last year, in total, the company distributed CA$3.60 to shareholders. Calculating the last year's worth of payments shows that Bank of Nova Scotia has a trailing yield of 4.5% on the current share price of CA$79.55. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Bank of Nova Scotia can afford its dividend, and if the dividend could grow.
See our latest analysis for Bank of Nova Scotia
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Bank of Nova Scotia paid out more than half (66%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Bank of Nova Scotia's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Bank of Nova Scotia has lifted its dividend by approximately 6.3% a year on average.
The Bottom Line
Is Bank of Nova Scotia an attractive dividend stock, or better left on the shelf? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Curious what other investors think of Bank of Nova Scotia? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
