We recently compiled a list of the 10 Best Bank Stocks With High Dividends.In this article, we are going to take a look at where The Bank of Nova Scotia (NYSE:BNS) stands against the other bank stocks.
In 2023, the US banking industry took a major hit, as Silicon Valley Bank collapsed, followed by the downfall of two other major banks. It was the biggest shake-up the industry had seen since the 2008 financial crisis. Despite the US banking crisis, the past two years have been the best for banks since before the Great Recession. Shocking, right?
Banking Sector Performance 2023
According to McKinsey, banks made $7 trillion in revenue and $1.1 trillion in net income globally during 2023, with a return on tangible equity of 11.7%. They have also strengthened their capital and liquidity, with capital levels at 12.8% and liquidity at 77.2%, both improving from 2022. In fact, banks earned more profit than any other sector worldwide last year. Right now, 14% of banks are making up 80% of the industry's economic profit, which is a big jump from 11% in 2013. This is nearly five times higher than most other industries, where a few big players usually dominate the performance.
In 2023, global dividends surged to a record $1.66 trillion, marking a 5.0% increase on an underlying basis, according to the Janus Henderson Global Dividend Index. The banking sector played a key role in this growth, delivering record payouts and accounting for half of the global increase in dividends. Higher interest rates allowed many banks to expand their margins, with emerging market banks contributing significantly to this increase – though banks in China didn't join in the dividend boom.
The banking sector is anticipated to maintain its strong performance this year, with analysts offering an optimistic outlook. On December 4, 2024, Moody'supgraded the global banking sector from negative to stable. The credit rating giant is positive because G-20 countries are easing up on interest rates and making some monetary adjustments, which should help with the asset quality and liquidity of banks. The economy seems to be stabilizing, and that should help banks recover, especially in terms of deposits. Of course, there are some risks like geopolitical tensions, trade issues, and possible shifts in the US policies under the new president could create uncertainties that might affect the global economy and the banking sector. So, while things are looking better, there is still some uncertainty on the horizon.
Our Methodology
For this article, we used the Finviz stock screener to filter out bank stocks with dividend yields exceeding 3%. We focused on picking stocks with a consistent record of paying dividends, offering dividend growth, and being financially stable to steer clear of yield traps. The list below is ranked in the ascending order of dividend yields, as of December 6. We have also mentioned the number of hedge fund holders in each firm, which was sourced from Insider Monkey’s Q3 2024 database.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
A businessman's hand pointing to a graph on a projector screen illustrating economic trends.
The Bank of Nova Scotia (NYSE:BNS) offers a wide variety of banking and financial services in Canada, the US, and internationally. It operates through Canadian Banking, International Banking, Global Wealth Management, and Global Banking and Markets segments. About 44% of the bank's clients with term deposits are now primary clients as of Q4 2024, which is a 4.4% increase this year. On top of that, 85% of clients renewing their term deposits stuck with The Bank of Nova Scotia (NYSE:BNS), either directly renewing or moving to new investments and products. The stock is up nearly 26% year-to-date as of December 6.
In its Q4 2024 earnings call, The Bank of Nova Scotia (NYSE:BNS) reported that overall revenue in 2024 went up 6% compared to the previous year, while expenses increased by 4%, giving the bank a 2.3% positive operating leverage. Fee and commission revenue also saw a 5% rise. The Canadian Banking segment had a solid performance, with earnings growing 7% to $4.3 billion, driven by deposit growth and improved margins, though there were higher expenses and PCLs. BNS also had a return on equity of 20.8%.
On December 3, The Bank of Nova Scotia (NYSE:BNS) declared a C$1.06 per share quarterly dividend. Shareholders who are on record by January 7, 2025, will receive the payout on January 29, 2025. It is one of the best bank stocks, with a steady dividend history and an attractive yield for investors.
Insider Monkey's third-quarter database shows that 18 hedge funds were bullish on The Bank of Nova Scotia (NYSE:BNS), an increase from 14 funds in the previous quarter.
Overall BNS ranks 1st on our list of the best bank stocks with high dividends. While we acknowledge the potential of BNS as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BNS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
