This global pandemic has certainly reshaped how many investors view stocks in general. Various sectors have underperformed to a greater degree in this “new normal” environment.
Large financial institutions in Canada and abroad have experienced widespread stock price declines amid large-scale capital outflows from this sector and a higher level of priced in risk.
This has resulted in much juicer dividend yields for lenders such as Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). Scotiabank’s mid-single digit yield provides those investors with income needs or value investors seeking to be paid to wait for an economic recover with the means to do so.
Scotiabank is a company many investors now view as a dividend pick given the lower expectations many have assigned to growth in this sector. This is a fine assessment and one I would agree with at this time due to obvious headwinds to lending growth such as the over indebtedness of the Canadian consumer today.
With such stocks now offering investors a dividend yield which in many cases is 10-times higher than long-dated bonds, picking up shares as an effective bond proxy certainly makes a lot of sense.
This is particularly true if banks continue to maintain payouts as they historically have in previous economic disasters. Getting paid to wait, and buying more on future price dips, is a strategy that has worked in the past for income investors, making Scotiabank stock attractive at these levels.
Invest wisely, my friends.
