Scotiabank: A 7%-Yielding Blue Chip Dividend Stock To Buy Now

Core Viewpoint - Scotiabank (BNS) has demonstrated strong financial performance in its fiscal second quarter, outperforming analyst expectations and maintaining a solid growth outlook despite some challenges in the market [1][16]. Financial Performance - BNS reported a revenue increase of 4.9% year-over-year to $6.1 billion in the fiscal second quarter, exceeding the analyst consensus by $30 million [2][16]. - The Canadian banking segment saw a 7% revenue rise, driven by a 12% growth in net interest income, although there was a 1% decrease in loans [2]. - The International Banking segment's revenue grew by 9%, with net interest income increasing by 14% [2]. - The Global Wealth Management segment also posted a 9% revenue growth, attributed to higher brokerage revenue and mutual fund fees [2]. - The Global Banking and Markets segment experienced a 2% revenue decline, but net income increased by 7% due to improved productivity [2]. Earnings and Valuation - BNS' adjusted EPS decreased by 7.2% year-over-year to $1.16, which was still $0.02 above the analyst consensus [2]. - The current P/E ratio for BNS is 9.6, below its 20-year average of 11.8, indicating a potentially attractive valuation [3]. - A fair value estimate of $52 per share suggests a 13% discount to the current share price of $45, with potential for 46% cumulative total returns by October 2026 [3]. Dividend Information - BNS offers a forward dividend yield of 6.7%, significantly higher than the financial sector's 3.7% yield, earning an A grade for forward dividend yield [6]. - The company has a long history of dividend payments since 1833, reflecting its resilience as a dividend payer [6]. - The expected payout ratio for FY 2024 is 65.8%, which is above the preferred 50% ratio, but growth in adjusted EPS is anticipated to allow for smaller raises while restoring the payout ratio [6]. Client Growth and Market Position - BNS added 95,000 net new primary clients in the first half of the fiscal year, with the lowest client attrition rate in three years [2]. - Over 45% of retail clients hold at least three products from BNS, indicating strong customer relationships [2]. - The company is well-positioned in the market, with improving financial health and a commitment to quality products and services [7].