BNS down significantly from their 2022 highs... "BNS stock is down from $95 earlier this year to $65. The steep plunge is the result of growing investor fears about the impact of a potential recession on both the Canadian and international operations.
Bank of Nova Scotia is unique among its peers with a big international business located in Latin America. The bank has spent billions of dollars over the past decade to buy assets in Mexico, Peru, Chile, and Columbia. The four countries form the core of the Pacific Alliance trade bloc that allows the free movement of labour, capital, and goods among the member countries. Combined, they are home to more than 230 million people. Bank penetration is low compared to more developed economies, so there are large growth opportunities for Bank of Nova Scotia as the middle class expands.
In addition, the presence in all four markets gives it an advantage for helping commercial clients who need a variety of cash-management services.
Investors are concerned about that a severe global recession will hit the Pacific Alliance economies hard and hammer the bank’s foreign earnings.
Bank of Nova Scotia raised its dividend by 11% late last year and increased the payout by another 3% when the bank delivered the fiscal second-quarter (Q2) 2022 results. The current payout provides a 6.3% dividend yield.
Bank of Nova Scotia trades for 7.8 times trailing 12-month earnings right now. This appears undervalued, considering the strong earnings so far this year and solid capital position. Bank of Nova Scotia generated $8.01 billion in net income for the first nine months of fiscal 2022 compared to $7.4 billion in the same period last year. The bank finished fiscal Q3 2022 with a common equity tier-one (CET1) ratio of 11.4%."
* BNS appears to be oversold. Near-term volatility is expected, but the dividend appears safe and we should see decent total returns over the long run. For those focused on passive income, the yield is fairly high and there is likely good upside potential for the share price when the market recovers. I'm sure we'll get back to $95 before too long.