Scotia Bank

Ticker: BNS, Buy below $60.

Bank of Nova Scotia is a major Canadian multinational bank.

Why I Would Buy

  1. Cheap – BNS is currently selling for 11x trailing earnings and 10x forward earnings.
  2. Dividend – Pays a 4+% dividend, while maintaining a payout ratio below 50%.
  3. Return on Equity – RoE has been consistently at high teens for the past decade.
  4. High Credit Ratings – Strong investment grade credit ratings on long term debt (A+ by S&P). I like strong long term debt ratings, as it is an indicator of the longevity and sustainability of earnings.
  5. Geographically Diversified – in addition to Canada, the bank has significant revenue streams emanating from Caribbean and Latin American countries.

What Could Go Wrong

  1. Recent Stock Issuance – BNS issued a large amount of stock recently to fund an acquisition, it may or not be accretive.
  2. Trade War – Looming trade war could hurt emerging markets that BNS is exposed to.
  3. Relative Valuation – Not particularly cheap when compared to other large banks e.g. JPM.