Tuesday, August 18, 2015

Recent Buy: Bank of Nova Scotia

With the Bank of Nova Scotia (“BNS”) hitting a 52-week low today, I took the opportunity to buy more shares and establish a full position in the company.  Beyond the yearly low price, here are some of the other reasons that I felt comfortable adding to my BNS position:

-          dividend yield of 4.5% on a bank that has grown its dividend at a compound average rate of 7.7% over the last 3-years is attractive.
-          Dividend growth has been supported by revenue and net income growth of over 5% in the same 3-year period.
-          Scotia maintains a strong balance sheet and conservative capital allocation policies that lead to A+/Negative and Aa2/Negative ratings from S&P and Moody’s.
-          The regulatory environment in Canada favors the incumbent big five banks and protects them domestically from foreign competition.
-          Although some would argue otherwise, I feel BNS’s South American exposure could be a growth catalyst in coming years, and will reduce reliance on the stagnant Canadian market.

Lastly, I read an article in the Globe and Mail last June indicating that picking the big five bank whose stock performed the poorest over the last 12-month period often led to the biggest gain over the following year.  Given BNS is the worst big five bank performer over the last year, I thought it’d be an interesting contrarian’s experiment to add to my position.

Are there other contrarians who like picking up stocks at their 52-week lows???

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