Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bank of Nova Scotia in Focus
Headquartered in Toronto, Bank of Nova Scotia (BNS) is a Finance stock that has seen a price change of -6.18% so far this year. Currently paying a dividend of $0.8 per share, the company has a dividend yield of 4.76%. In comparison, the Banks - Foreign industry's yield is 3.51%, while the S&P 500's yield is 1.53%.
Looking at dividend growth, the company's current annualized dividend of $3.20 is up 12% from last year. Over the last 5 years, Bank of Nova Scotia has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.03%. 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 48%, meaning it paid out 48% 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 $6.69 per share, representing a year-over-year earnings growth rate of 7.04%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BNS is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Bank of Nova Scotia The (BNS) : Free Stock Analysis Report
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