Canadian financials stocks have continued to underperform other growth areas of the market, and dividend yields continue to be elevated above historical levels, despite pretty impressive performance in recent months as Canadian banks have rebounded off of March lows.
I think there is much more room for capital appreciation in this sector, and think investors ought to consider locking in some pretty decent yields right now, particularly given the fact that fixed income investments now offer next to nothing in terms of yield.
Among the Canadian banks, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has one of the best dividends of its peers, for a number of reasons. In addition to a relatively high yield, comparable to Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), the other Canadian bank with a yield around 5.3%, Scotiabank’s fundamentals and operations give this stock a leg up, in my opinion, in terms of long-term cash flow growth and the potential for dividend increases over time.
Scotiabank has grown its dividend consistently over the past five decades, only missing a few years of increases, either holding its distribution stable or increasing it each and every year. For those looking for income that appreciates over time, this is a great core holding for an investment account like a Registered Retirement Savings Plan (RRSP) or the equivalent elsewhere.
I think this dividend is not only safe, well-covered, and poised to grow, but may decline in the near-term as higher-yielding assets get bid up, so locking in that yield today may be a winning strategy!
Invest wisely, my friends.
