# Bank of Nova Scotia (BNS.TO, BNS)



## Emma

Still working on my wish list and tried a search on Investopedia for "negative dividend payout ratio" . Got mostly annoying ads. I wanted a simple explanation for the -155.64 dividend payout ratio for BNS. Is negative a bad thing in this case? Is there a better site for answering basic questions?


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## GoldStone

http://www.theglobeandmail.com/globe-investor/markets/stocks/summary/?q=BNS-T

EPS: 5.35
Dividend: 2.40
Payout: 2.40 / 5.35 = 45%

Where did you get your number?


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## Echo

Not sure where you found that negative number. I see a payout ratio of 42.55% - http://screencast.com/t/10oL8MAZ


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## Emma

It shows on my Globe Watchlist in the dividend view. Also shows price to cash flow as -36.80. Thanks for the correct info.


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## My Own Advisor

Don't believe everything you see on the Internet 

That said, BNS is closer to 52-week low than high. Geez, I wish I had some money to invest! BNS has paid dividends since 1832.


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## humble_pie

data bases & stock screeners are notoriously faulty.

detailed thomson quotes are pretty reliable.

trivia du jour (please do not read if rushed or otherwise gainfully occupied):

dividends for interlisted stocks that are paid in the opposite currency are quoted by thomson in an exact amount even though frequently the currency conversion hasn't taken place yet, therefore the exact dividend amount cannot yet be known.

Q: where is thomson getting its dividend figure from?
A: thomson is using the spot FX rate, which means that, during the period from declaration of a current dividend to payable date, the dividend amount shown in an interlisted thomson quote is not exact but is a guesstimate only.


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## Killer Z

Good new for BNS today:

http://business.financialpost.com/2...dend-as-profit-rises-35-on-ci-financial-sale/

Raises dividend for the second time this year ......$0.64 to $0.66. The Cdn banks continue to impress.


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## MrMatt

Killer Z said:


> Good new for BNS today:
> 
> http://business.financialpost.com/2...dend-as-profit-rises-35-on-ci-financial-sale/
> 
> Raises dividend for the second time this year ......$0.64 to $0.66. The Cdn banks continue to impress.


I bought my BNS 6 years ago at $37.50, seemed like a good idea at the time.


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## leeder

Somewhat of a disappointment for me, in the short-term. International banking, the bread-and-butter of BNS, hasn't delivered. While I continue to hold it for the dividend growth in the long-term , I really would like to see better performance.


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## OurBigFatWallet

I think the drop today was focused more on short term than long term. For me its done well in the long term and raising the dividend (again) shows they are serious about providing a decent return to long term investors. No problem with buying more BNS even if the international banking side didn't meet expectations today


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## martinv

Sept. 2013 the BNS share price was around $60. Now it is $72.00. That is about 20%.
Combine that with the 4% dividend and I come up with about a 24% return for one year.
I think we may have a difference in our definition of "disappointment".
Very pleased with my long term investment in BNS.


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## leeder

Like I said, BNS has disappointed in the short-term. 

Based on Google Finance, YTD numbers (excluding dividends):

BMO: 16.03%
BNS: 9.06%
CM: 15.48%
RY: 12.98%
TD: 15.01%
S&P TSX: 14.67%

Relative to its competitors (the other four major banks) and the index, I would classify BNS as a disappointment this year. I do think BNS will perform well down the road, but the international banking needs to fire on all cylinders.


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## dubmac

leeder said:


> Like I said, BNS has disappointed in the short-term. .


I hold a few banks for the reason that leeder quoted above. I hold BNS and RY - others may hold different combinations - or XFN. My understanding of Cdn banks is that a few have specific strengths that make them strong performers in certain economic conditions. RY for example has (supposedly) a strong wealth managment arm that makes it an attractive bank. others, like TD (I think) have strong retail assets. best to hold them in pairs, or just go with XFN.

Also - banks fortunes (sic) change with time - leaders among the five seems to change every few years. BMO may be the leader now, but wait a few quarters - my guess is that it'll be replaced by one of the others.


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## Brad911

Its important to remember that the work BNS does outside of Canada and the USA will always be priced as a slight discount in the market (IMO). 

In North America we often invest as if we are the centre of the universe and what is great about BNS is their push into Central and South America where realistically the banking opportunities are vast. They are much different than here (mobile banking, small ATM centres, etc), which is why the "view" is often that they underperform. Credicorp, Santander, BBVA and a few others are here as well, but 10-15 years down the road is where the activities pay larger dividends. 

It makes more sense when you look back at historical data (over 10 years ago) and compare ROE, Loan growth, etc. Its one of my core holdings in my portfolio.

Think of it this way; when was the last time you thought how much toothpaste CL sold in China last year? Investors generally only care how much they sold here in North America.


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## Moneytoo

According to fool.ca report, BNS is the only bank (out of big 5) that doesn't require waiting to initiate a position (and I was hoping to buy it under $70, but that doesn't seem to be happening... )

_*What to wait for*

As mentioned earlier, the best time to buy a bank’s shares is when short-term issues are grabbing the headlines, and the stock price has become depressed. That is exactly what has happened with Bank of Nova Scotia. So, there’s a strong argument for not waiting at all and buying the shares right away._


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## gibor365

leeder said:


> Like I said, BNS has disappointed in the short-term.
> 
> Based on Google Finance, YTD numbers (excluding dividends):
> 
> BMO: 16.03%
> BNS: 9.06%
> CM: 15.48%
> RY: 12.98%
> TD: 15.01%
> S&P TSX: 14.67%
> 
> Relative to its competitors (the other four major banks) and the index, I would classify BNS as a disappointment this year. I do think BNS will perform well down the road, but the international banking needs to fire on all cylinders.


I noticed that banks that perform worse in specific time , will perform better later.... It happened with RY, BMO, CM in last several years... so yes, I would agree that now it's good time to buy BNS.... I cannot as hold it in TFSA and don't have contribution room available


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## james4beach

Banks perform well during credit expansion, low market risk, and real estate growth. As we've had all those conditions in the last few years it's pretty natural to see bank stocks perform so well.

When those things reverse, bank stocks will not perform so well.


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## nathan79

Still dropping... I wonder how much lower it'll go.


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## My Own Advisor

Canadian banks, overall, seem like a good deal now.
http://www.ndir.com/SI/strategy/tse60.vr.shtml


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## Killer Z

My Own Advisor said:


> Canadian banks, overall, seem like a good deal now.
> http://www.ndir.com/SI/strategy/tse60.vr.shtml


Interesting table and website ....thanks MOA.


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## merevial

I wouldn't touch banks stocks with a 10 foot pole. Almost everyone is in debt. Real estate prices are at insane valuations and oil prices hitting Canada hard. I'm gonna sell off and wait.


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## Causalien

merevial said:


> I wouldn't touch banks stocks with a 10 foot pole. Almost everyone is in debt. Real estate prices are at insane valuations and oil prices hitting Canada hard. I'm gonna sell off and wait.


Sold out of banks 2 years ago expecting this. It took 2 years to happen.


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## HaroldCrump

2 years to happen what? Nothing has happened....


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## My Own Advisor

Same though Harold... I'll happily collect bank dividends.


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## blin10

merevial said:


> I wouldn't touch banks stocks with a 10 foot pole. Almost everyone is in debt. Real estate prices are at insane valuations and oil prices hitting Canada hard. I'm gonna sell off and wait.


there's always something: houses overprices wouldn't touch banks, pipelines overprices wouldn't touch pipeline stocks, interests rates going up wouldn't touch reits, potash prices going down wouldn't touch potash, energy prices going lower wouldn't touch energy stocks, telecom might have 4th player wouldn't touch telecom stocks, etc, etc...

while people like me bank on it and laugh at all those "analysts"


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## My Own Advisor

If I listened to others including what the talking heads predict I wouldn't be where I am nor headed where I am going.

I often think most CMFers have a better handle on things than most talking heads....


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## leeder

If you're a long term investor, you shouldn't worry about housing market, real estate prices, etc etc. Perhaps there may not be as much growth potential in Canadian banks compared to the US banks. However, Canadian banks are as steady as they come. Even at the worst of times (2008-09), Canadian banks have maintained their dividend payout. If anything, currently certain Canadian banks are trading at reasonable valuations. New long-term investors can pick some up at good prices. BNS would be one of those banks that is a good buy for the long-term.


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## OptsyEagle

I think a lot of investors remember what happened to the banks in the US and automatically expect that Canada will eventually have the same outcome. Most US investors, that may currently be short, would fall into this category. Now I don't disagree that our real estate is probably overpriced and that many of our citizens are overly indebted, but I doubt we will have the same issues as they did.

First off, the US would loan money to people at 100% loan to value. They would create mortgage products that basically disregarded income and credit worthiness of the borrower. Lastly they had something like 10,000 different competing banks. In Canada, our banks will choke on anything close to 80% loan to value. We are very critical about credit worthiness and income verification. Lastly we live in an ogilopoly (I am sure I spelled that wrong but we really only have 5 big banks with all the rest just taking the crumbs left on the table). What that means is if our banks get themselves into trouble, as long as it doesn't all hit them in a single quarter or maybe two, they will simply raise their fees or interest rates on loans or drop the rates on deposits, to recapitalize. That's what our 5opoly has always done and I suspect they would be successful with that strategy again, this time.

So unless you expect our real estate market to drop more then 20% in 2 consecutive quarters, or some other avenue for banking to reappear in the next few years, I think the banks are pretty safe, for the long term.

As always, I could be wrong, so stay diversified.


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## Eder

Quick back of envelope...if RY had no risk associated with it it would trade at ~$170/share...I think there is much risk already built into it's $72 price.


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## pastorash

I bought RY recently, BNS a couple of months back, CM a while ago. Building my dividend portfolio from scratch, 8 positions now, 3 Cdn. banks to start with. As has been mentioned, I'll take my dividends and happily wait out these blips.


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## oob

Eder said:


> Quick back of envelope...if RY had no risk associated with it it would trade at ~$170/share...I think there is much risk already built into it's $72 price.


Mind sharing the details of your math?


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## hboy43

oob said:


> Mind sharing the details of your math?


If it had no risk, it would be a utility and have a PE of 20 to 50 like ENB, FTS, TRP etc?

hboy43


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## oob

OK I see what you're getting at.


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## KaeJS

Thinking about writing 10 Naked Puts for April 17 @ $62 Strike. Premium is currently $0.85.

Anyone bought this lately or has options on it?
I know they are restructuring and have some oil exposure. But that's what I am looking for... I want a high premium.

Implied Vol & Delta look good to me.

Thoughts?


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## KaeJS

A little disappointing to see BNS up today.

I was hoping for a slight dip. Don't think I will be writing any Naked Puts today...
It is still attractive, but it looks like oil will keep dropping and I would like to get a $1 Premium.


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## londoncalling

I agree Kaejs. I want to start a position in BNS and was hoping for the slide in share price to continue but today was not helpful. I will continue to wait patiently.


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## KaeJS

Sold 5 Naked Puts for April 17 expiry.
$62 Strike. $0.62 Premium.

I sold a little early, apparently. :biggrin:


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## supperfly17

Anyone care to chyme in why this one is being beaten more than other big banks?


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## FrugalTrader

Likely because of their international exposure (the most of any Canadian bank). Just reading a report that they have operations in more than 55 countries and 21 million customers.


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## jerryhung

BNS is the worst of my 4 bank holdings (TD, RY, BMO, BNS)... yes, I shouldn't hold so many but BNS will be the first I sell if I breakeven @@


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## My Own Advisor

Be happy a quality company like this is tanking in price!


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## cashinstinct

National Bank is down too, p/e under 10 now


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## londoncalling

My current dilemma is to decide whether or not to average down now or wait for a bit of a bounce.


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## thepitchedlink

got in today a bit as well


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## godblsmnymkr

jerryhung said:


> BNS is the worst of my 4 bank holdings (TD, RY, BMO, BNS)... yes, I shouldn't hold so many but BNS will be the first I sell if I breakeven @@


waiting to sell when you get to break even is one of the main no-no's of investing and of the most common mistakes. you should either sell it because you think its a bad investment or keep it because you think it is a good investment. breaking even should have nothing to do with it. if you cant take a loss you are going to get roasted with this type of thinking.


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## besmartrich

londoncalling said:


> My current dilemma is to decide whether or not to average down now or wait for a bit of a bounce.


I feel you!


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## londoncalling

In the 57.xx trying to restrain myself from pulling the trigger on another buy. :biggrin:
Guessing we may be in pullback mode now.


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## Vishal

*absent without leave*

I'm from Australia buying into the US ADR of BNS. I'm quite surprised at the extent of the fall; I thought it was good value at US$50 (when I took my initial position) given an all time high of US$67.55, but now its down to US$43.71. It seems to be underperforming peer banks I'm guessing due to its exposure to volatile Latin American economies and oil & gas. But then again it has paid dividends without fail since 1832 so I expect when oil prices bounce back Scotia will outperform. Looking to add more if it slumps to US$40 if I don't decide to get into RY or TD.


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## lost in space

Ok just ran some Fastgraph calculations current P/E ratio is 9 (I bought slightly below the current price) and if it were to return to it's historical P/E ratio of 12.5 you'd be looking at the following gains

November 1st 2016 - 14.25 price gain and 2.12 dividends 
November 1st 2017 - 19.39 price gain and 5.16 dividends 
November 1st 2018 - 26.47 price gain and 8.36 dividends

As stocks tend to overshot I think it's reasonable to consider a 13.5 PE

November 1st 2016 - 23.11 price gain and 2.12 dividends (note that's nearly 50% higher than i bought it)
November 1st 2017 - 28.02 price gain and 5.16 dividends 
November 1st 2018 - 36.08 price gain and 8.36 dividends

As Garth Vader said the other day, Banks are cheap and getting read to pop. Feels good to be in a position where I can buy!

I eventually run calculations for all the banks


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## Pluto

jerryhung said:


> BNS is the worst of my 4 bank holdings (TD, RY, BMO, BNS)... yes, I shouldn't hold so many but BNS will be the first I sell if I breakeven @@


Jerry, Bad thinking. You should be holding these things for longer than just breaking even. If it is a good investment, you should be thinking of buying more right now. When you bought, you bought a little piece of a business. Give it time to do its job for you.


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## gibor365

If you checl historical trends , you can see that bank (from big 5) who is performing the worst now , would perform the best in future... It was true about BMO and RY in last 5 years, most likely it would be the same with BNS


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## londoncalling

I agree Gibor. I read a couple articles on Canadian banks long ago indicating to keep adding to Can banks using these three metrics 

1. buy the bank with the worst performance using P/E or P/B
2. buy the bank with the highest yield

Another article I read said buy banks over 5% yield sell at 3%.

I tried to somewhat follow that advise for accumulation.

RY Nov 2011 
BMO Mar 2012
BNS Fall 2015
CWB Jan 2016

Haven't done comparative analysis. Would have liked to get TD but always felt it was overpriced. Regardless I think all of these were great buys at the time.


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## peterk

lost in space said:


> As Garth Vader said the other day, Banks are cheap and getting read to pop. Feels good to be in a position where I can buy!


I agree they are cheap, but what is the explanation for getting ready to pop though? I don't see why the Canadian economy, stock market, or its bank's stocks would be getting ready to pop anytime in the near future...


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## My Own Advisor

Happy DRIPper at these prices!


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## Twixer

peterk said:


> I agree they are cheap, but what is the explanation for getting ready to pop though? I don't see why the Canadian economy, stock market, or its bank's stocks would be getting ready to pop anytime in the near future...


The reason could be some political event moving price of oil much higher. For them it is important that event is not in Latin America. 

It will probably move with price of oil if housing market doesn't collapse.


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## agent99

peterk said:


> I agree they are cheap, but what is the explanation for getting ready to pop though? I don't see why the Canadian economy, stock market, or its bank's stocks would be getting ready to pop anytime in the near future...


The rule Gibor quoted is based on hindsight. It may or may not still be valid. I was looking at buying BNS myself, but just a small addition to existing holdings. 

After reading in WSJ and elsewhere about problems Euro, Asian and other banks are facing, I think I might not add any more $$ to financials. Surely we are not immune to the factors affecting banks globally? And on top of that we have the affect of low oil prices. Banks will no doubt recover, but when? 2-5 years from now?


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## Eder

Best to but Canadian banks when they have recovered and pe's are higher. Or not.


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## gibor365

> The rule Gibor quoted is based on hindsight. It may or may not still be valid. I was looking at buying BNS myself, but just a small addition to existing holdings.


 obviously that you never know . I'm looking to add a bit to my BNS position with new TFSA money


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## besmartrich

BNS is really an undervalued stock lately as well as CWB, NA, BMO, CIBC. 

For some reason, I always found RY and TD are being traded at some premiums compared to BNS, CWB, NA, BMO and CIBC.

Will wait for bad news from RY and TD. If not, average down on BNS and CWB for a while.


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## Pluto

peterk said:


> I agree they are cheap, but what is the explanation for getting ready to pop though? I don't see why the Canadian economy, stock market, or its bank's stocks would be getting ready to pop anytime in the near future...


(Who is Garth Vader? lol)

It is best to buy stocks when the economy is bad. By the time the economy is proven good, stocks have already gone up. Stocks go down in advance of bad economic news, and they go up in advance of good economic news. 

Clearly, the bank stocks topped out in 2014 when economic news was OK, and there was lots of optimism. That's typical. Now the TSX is down 24% from peak to recent trough. The bank stocks reflect that. I suspect Garth Vader thinks all the bad news is priced into the bank stocks and have nowhere to go but up. Not unreasonable. Stocks go up in advance of economic recovery. 

If you think along the lines that the economy has to be good before stocks are safe, you will always be a day late, and a dollar short. If you think like Templeton - buy during times of pessimism you will be ahead of the game. A time of pessimism is the safest time to buy stocks because the stock prices are already depressed. Same message from Buffett and Munger: buy when others are fearful, sell when others are greedy. The greedy and overly optimistic were buying bank stocks in 2014. Could be that many of them are now pessimistic and selling - typical buy high, sell low trap.


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## Koogie

Bought BNS during the recent dip (along with NA). I'm not an armchair analyst so all I know is that I got a common stock in a well run business that has been around longer than this country. I bought near the 52 week low and that it is paying me over a 5% dividend while I hold it until infirmity sets in. That's about as close to a sure thing as you're gonna get in my opinion.


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## MrMatt

besmartrich said:


> BNS is really an undervalued stock lately as well as CWB, NA, BMO, CIBC.
> 
> For some reason, I always found RY and TD are being traded at some premiums compared to BNS, CWB, NA, BMO and CIBC.
> 
> Will wait for bad news from RY and TD. If not, average down on BNS and CWB for a while.


TD is IMO the best bank by far and RY is second really good.

CIBC is horrible.

BMO and BNS are hit and miss.

I think the stock market is right on this one, though I hope TD raises the dividend soon.


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## 1980z28

Picked up some bns 53.48 for 500

first purchase of bns


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## lost in space

Makes two of us, got in at 54.50 bit off of bottom, it's trading well under it's normal PE ratio and going forward earnings are quite strong. This time I won't sell too soon!


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## My Own Advisor

Koogie said:


> Bought BNS during the recent dip (along with NA). I'm not an armchair analyst so all I know is that I got a common stock in a well run business that has been around longer than this country. I bought near the 52 week low and that it is paying me over a 5% dividend while I hold it until infirmity sets in. That's about as close to a sure thing as you're gonna get in my opinion.


+1 BNS and NA have been cheap for some time. Great buys now. TD and RY and others are coming down too  Yippee!


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## agent99

My Own Advisor said:


> +1 BNS and NA have been cheap for some time. Great buys now. TD and RY and others are coming down too  Yippee!


Banks world wide are being hammered - be careful!


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## blin10

My Own Advisor said:


> +1 BNS and NA have been cheap for some time. Great buys now. TD and RY and others are coming down too  Yippee!


I did some numbers for NA, what's interesting, in the 08-09 recession NA was yielding (approx.) 6%.... in 2002-2003 NA was yielding around 3.2% dividend... and right now right now it's yielding 5.8%

I have a ton of bank shares, but I keep buying more, I just don't see how we can loose here over the long term.... sure, it can go lower 10/20/30% but i'll be adding all the way down (they're monopolies, they're not going bankrupt)


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## Twixer

lost in space said:


> As Garth Vader said the other day, Banks are cheap and getting read to pop. Feels good to be in a position where I can buy!
> 
> I eventually run calculations for all the banks


It will pop if oil pops. 

It operates almost exclusively in resource based economies, the rest are tourism based economies currently affected by zika virus. 

Amazingly it still trades on P/E similar to JPM or Bank of America.


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## My Own Advisor

Even if we get no dividend increases this year from any banks (highly unlikely), they are all yielding over 4%, some over 5% and you get tidy cash flow. The big 6 CDN banks have paid dividends _for nearly a thousand years_ combined. I like my chances they'll continue to pay money for the next 40 years I need them. 

The reality is, if our CDN banks all go under, all pension-plans go under, our entire economy goes under. This is also why you diversify out of Canada.

As long as you're going to invest in this country, banks are pretty darn good investments long-term.


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## gibor365

> vThe reality is, if our CDN banks all go under, all pension-plans go under, our entire economy goes under. This is also why you diversify out of Canada.


 That what I was telling too  , if our CDN banks all go under, Canada as a country goes under and diversification out of Canada won't really help, unless you immigrate


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## agent99

gibor said:


> That what I was telling too  , if our CDN banks all go under, Canada as a country goes under and diversification out of Canada won't really help, unless you immigrate


Had read details before, but went to see The Big Short last night. Good reminder of what can happen. If they hadn't got bailed out, quite a few more of the US banks would have gone under. Same with UK banks. Our banks may not go under, but I don't think it's a good time to be buying more. There are good reasons why they are cheap. I already have too much in financials. The recession some are predicting hasn't even started yet. What would a 2% rise in interest rates do to homeowners, esp in bubble areas like Toronto & Vancouver? Defaults wouldn't help the banks much on top of losses in the oil industry. This is different from 2008 for Canada.

I am trying to sell some equity including financials on upticks and go to more fixed income/cash. Problems is, no upticks lately! Bear in mind, we are in retirement and need to try and conserve capital.


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## OurBigFatWallet

agent99 said:


> Had read details before, but went to see *The Big Short* last night. Good reminder of what can happen. If they hadn't got bailed out, quite a few more of the US banks would have gone under. Same with UK banks. Our banks may not go under, but I don't think it's a good time to be buying more. There are good reasons why they are cheap. I already have too much in financials. The recession some are predicting hasn't even started yet. What would a 2% rise in interest rates do to homeowners, esp in bubble areas like Toronto & Vancouver? Defaults wouldn't help the banks much on top of losses in the oil industry. This is different from 2008 for Canada.
> 
> I am trying to sell some equity including financials on upticks and go to more fixed income/cash. Problems is, no upticks lately! Bear in mind, we are in retirement and need to try and conserve capital.


I really enjoyed that movie. I still can't believe how reckless the banks were in the US during the financial crisis. Sadly I'm not sure they learnt much and I can see it happening again. Not sure if the same could happen in Canada but as mentioned above they've paid dividends for a loooooong time, so I'd be happy to average down if prices take a dip


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## Islenska

Canadian banks are like that old Elan SkiDoo in the back yard, dull and steady but it gets the job done on a cold day!


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## gibor365

> What would a 2% rise in interest rates do to homeowners


 Who gonna raise rates 2% during recession?!


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## agent99

gibor said:


> Who gonna raise rates 2% during recession?!


What recession?

TSX today: http://web.tmxmoney.com/caarticle.php?newsid=82702398

Things don't look good for the banks:



> The heavyweight financials group fell to its lowest level in more than two years, with Royal Bank of Canada down 1.7% to $65.08 and Toronto-Dominion Bank off 1.7% at $48.86.





> European bourses tumbled as Deutsche Bank dropped 5% and UBS fell 4.6%.


Not trying to tell you guys what to do. Personally, I am not selling my banks stocks, but definitely not buying more.


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## doctrine

Good earnings from BNS. Earnings up 5% but revenue up 8% which bodes well for the future. 

http://www.stockhouse.com/news/pres...f-1-814-million-for-the-first-quarter-of-2016

BNS has been one of the top performing banks in recent months and is breaking out from 3 month lows. Even so, sitting with a 5% yield. My largest bank holding other than HCG.


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## GoldStone

doctrine, fyi

Reserve Worries Dog Canada Banks - WSJ


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## humble_pie

there's a school of thought somewhere that says canadian banks are continuously issuing new preferred shares in order to raise the money to pay out on the common dividends, ie something like a ponzi scheme, except nobody really dares to say the name.

the new bailout provisions make things potentially more challenging for bank debenture & preferred holders. All this is impossible to figure precisely because no one can ever understand a bank's financial statements. Not even those who help to write them, said a former cmf member who told the forum he'd retired as a TD vice president.



[


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## doctrine

GoldStone said:


> doctrine, fyi
> 
> Reserve Worries Dog Canada Banks - WSJ


I can't see that whole article, but I get the gist. The data I have seen suggests the big 5 banks have about $18B in total energy loans (including mid-stream, i.e. Enbridge/TRP/etc), of which perhaps $8B is not investment grade and perhaps $5-6B is non-investment grade exploration and production (all very rough numbers). Spread out over the 5 banks, this is equal to about 6 weeks of net profit, or 12 weeks while still maintaining dividends, assuming they can't make up for it with increased profits in Ontario and Quebec who are poised for increased economic gains with the Cdn dollar below 80 cents. In other words, not concerned at this time.

I'm also not worried about preferred shares. For example, BNS issued a net $350M in new preferred shares in the trailing 12 month period, versus trailing 12 month net profit of close to $7,000M of which 45-50% was paid in dividends. That is hardly a ponzi scheme.


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## gibor365

> That is hardly a ponzi scheme.


 If our "big banks" are ponzi scheme, than Canada is ponzi scheme


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## GoldStone

doctrine said:


> I can't see that whole article, but I get the gist.


Google has a back door to WSJ. Google article title and follow the link.


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## birdman

humble_pie said:


> there's a school of thought somewhere that says canadian banks are continuously issuing new preferred shares in order to raise the money to pay out on the common dividends, ie something like a ponzi scheme, except nobody really dares to say the name.
> 
> the new bailout provisions make things potentially more challenging for bank debenture & preferred holders. All this is impossible to figure precisely because no one can ever understand a bank's financial statements. Not even those who help to write them, said a former cmf member who told the forum he'd retired as a TD vice president.
> 
> 
> I couldn't open the article but a quick look at TD Bank statement for 2015 shows total Equity growing from 56,231 (million) to a respectful 67,028 of which only 500 Million was from the issuance of preferred shares. (page 115 of the annual report). Page 201 of the report shows Preferred shs at 3,395 from 2009 thru to 2013 then down to 2,200 then up to 2,700. Total equity is UP 12 BILLION for the year. Total Capital ratio also increased to 14% from 13.4%. All looks good to me. Can't be bothered to check out all the other banks but just happened to receive the TD Annual Report yesterday.


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## james4beach

From my perspective, the bigger issue with the banks is the relationship between large losses and equity.

The banks are very highly leveraged. If they ever get big losses that threaten their solvency and survival, they have to issue more equity. That's how a bank re-capitalizes or bolsters its financial condition. That's why I don't want to hold shares in banks.

And here's what happens when a bank encounters trouble and needs to raise capital, *even if it is bailed out*
Citibank chart from 2000 til now, total return

Not good. Years of some gains, followed by catastrophic equity losses while the equity is heavily diluted to raise capital. I keep hearing bank shareholders around here saying they're not worried because the Big Five will get bailed out. But they don't understand that a bailout also involves heavy equity dilution.


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## AltaRed

With the new NVCC compliant preferred share issues by the banks, the prefs can get converted to 5 shares of common equity when/if I think common shares hit $5. The prospectuses for the new NVCC compliant prefs are pretty complicated, but yes, conversion is possible in a major crisis and yes, the regulator must believe there are conditions where common equity could get to $5. All this is designed so that the taxpayer is much less likely to NOT have to bail out the banks aka what happened in the USA.


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## Oldroe

And there you again applying US banks to Canadian banks. You sure waste time being a bad investor.


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## GoldStone

Untapped Loans Double Canadian Banks Oil Exposure to $80 Billion - Bloomberg Business



> Scotiabank, Canada’s third-largest lender, has the highest credit exposure to oil-and-gas, including C$17.9 billion in outstanding loans and C$14.1 billion of commitments, according to March 1 disclosures. About 60 percent of the drawn exposure is investment grade, compared with about 75 percent for the undrawn commitments, the bank said.
> 
> “When you back out the investment grade, what’s left is a very small portion that is an area of focus, but we’re very comfortable,” Chief Financial Officer Sean McGuckin said Tuesday in telephone interview from Toronto. “We do a name-by-name analysis on a regular basis and we’ve got a good handle on this portfolio."


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## james4beach

Oldroe said:


> And there you again applying US banks to Canadian banks. You sure waste time being a bad investor.


Don't worry, Oldroe. If you are incapable of learning from me, then Mr. Market will teach you.

It's almost as if you didn't pay any attention to Canadian banks in 2008.

CIBC, 2008
BMO, 2008
National Bank, 2015
Article about all Canadian banks, might need to issue shares, 2016


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## Eder

The only thing I learned about Canadian banks in 2008 was to buy buy buy. Can you imagine getting BMO for $25 bucks a share? I did.
In 30 years when the younger crop here is getting ready to pull the pin I'm sure that many will brag about grabbing BMO in the $70's. Of course I'll be dead but you can still thank me later.


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## hboy43

Oldroe said:


> And there you again applying US banks to Canadian banks. You sure waste time being a bad investor.


His goal seems to be to never lose money on any transaction or any position. In that respect he must be considered successful because he is presumably following his policies and achieving that goal.

In James' world the glass isn't half empty or half full. There is no glass. I think I recall him saying that his father lost significant sums of money in a stock or stocks, and this has clearly influenced his world view to be vastly different from most other people. I understand how trauma can distort one's thinking as I relayed my own trauma here some years ago. It took me 30 years to even realize I was traumatized.

The problem I have is that he seems to think that everyone else should share his goal. And he never stops selling it. If he just came in here and said this is why I do what I do, then fine. But his view is that his beliefs should be universal to everyone is plainly wrong. It likely helps other similarly financially traumatized people, but it is not applicable to the rest of us. Frankly his views are dangerous for most people. As are mine, but I don't try to sell what I do as some kind of universal truth that is applicable to all.

My goal is to harvest the long term 8% PA that stocks have traditionally provided and I don't care much how ugly is the path to getting it. As reported elsewhere on this forum, the path has been quite ugly the past 2 years or so. I actually agree with people, and James is likely one of them, who say that perhaps going forward due to demographics and other factors that 8% PA might turn into say 6% PA. Still, even 6 is still greater than 3 (ie GICs currently) and if that is what it comes to, it is what it is.

hboy43


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## james4beach

> His goal seems to be to never lose money on any transaction or any position.


You may not be aware of this thread in which I describe very high risk stocks I invest in, with the aim being high risk and high reward. I have also repeatedly said that I invest in precious metal bullion funds, going so far as to buy CEF.A at steep discount to NAV after it had plummeted tremendously... and doing a very risky thing of buying a hated security, "buying low". Which people, on here, repeatedly told me I was crazy to do.

I'm not sure if you see these things and ignore them, but clearly, I do take risks with money. I weigh risk and reward, and choose appropriate risk-reward propositions. Bank stocks don't appeal to me because there is tremendous downside risk (because they are highly leveraged businesses) and their reward doesn't compensate me enough for that risk.

Honestly, I get a kick out of this forum's reactions to my posts. The reactions are especially intense when I describe why I'm bearish on Canadian bank stocks. This tells me that people have an emotional attachment to their bank investments and are unwilling to hear critique. People in CMF, and Canada in general, are very over-weight Canadian bank stocks. Hence these reactions.

Take note, that reaction does not occur to _energy stocks_. Nor does it happen if people criticize investments like VRX or tech stocks.


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## Causalien

james4beach said:


> You may not be aware of this thread in which I describe very high risk stocks I invest in, with the aim being high risk and high reward. I have also repeatedly said that I invest in precious metal bullion funds, going so far as to buy CEF.A at steep discount to NAV after it had plummeted tremendously... and doing a very risky thing of buying a hated security, "buying low". Which people, on here, repeatedly told me I was crazy to do.
> 
> I'm not sure if you see these things and ignore them, but clearly, I do take risks with money. I weigh risk and reward, and choose appropriate risk-reward propositions. Bank stocks don't appeal to me because there is tremendous downside risk (because they are highly leveraged businesses) and their reward doesn't compensate me enough for that risk.
> 
> Honestly, I get a kick out of this forum's reactions to my posts. The reactions are especially intense when I describe why I'm bearish on Canadian bank stocks. This tells me that people have an emotional attachment to their bank investments and are unwilling to hear critique. People in CMF, and Canada in general, are very over-weight Canadian bank stocks. Hence these reactions.
> 
> Take note, that reaction does not occur to _energy stocks_. Nor does it happen if people criticize investments like VRX or tech stocks.


I am similar to James in investments. I remember getting bashed in my wild theories from 2009 till 2011. They've all brought me loads of money now.
ANyway, banks preferred is something I am looking into. Especially those guaranteeing 5% interest rate. But what is this new thing about NVCC? Does it apply to app previous preferrs retroactively?


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## Eclectic12

james4beach said:


> ... Honestly, I get a kick out of this forum's reactions to my posts. The reactions are especially intense when I describe why I'm bearish on Canadian bank stocks. This tells me that people have an emotional attachment to their bank investments and are unwilling to hear critique.
> 
> People in CMF, and Canada in general, are very over-weight Canadian bank stocks. Hence these reactions.


Question is ... does this reaction translate to what people hold?

As one who has disagreed, last I checked ... banks were a big part but still a part of the index. I doubt if bank stocks have hit 10% of my portfolio ... though gold in particular and/or mining hasn't hit 10% either. :biggrin:


Cheers


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## AltaRed

Causalien said:


> I am similar to James in investments. I remember getting bashed in my wild theories from 2009 till 2011. They've all brought me loads of money now.
> ANyway, banks preferred is something I am looking into. Especially those guaranteeing 5% interest rate. But what is this new thing about NVCC? Does it apply to app previous preferrs retroactively?


No. The older prefs (both straight perpetuals and fixed resets) did not have potential (forced) conversion provisions. This is a recent initiative by the government to ensure bank shareholders bear all (most) of the pain to ensure the taxpayer is not on the hook for bailouts. There are two things that changed in the past circa 3 years... firstly the NVCC compliant issue (and one of the reasons banks have been calling their own prefs (both straights and fixed resets) and re-issuing new NVCC compliant issues) and secondly, the new fixed resets have needed to provide a floor in dividend yield in order to market them. No retail buyer is willing to purchase the new preferreds given their recent experiences with plummeting prices on existing fixed resets.


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## hboy43

james4beach said:


> I'm not sure if you see these things and ignore them, but clearly, I do take risks with money. I weigh risk and reward, and choose appropriate risk-reward propositions. Bank stocks don't appeal to me because there is tremendous downside risk (because they are highly leveraged businesses) and their reward doesn't compensate me enough for that risk.


I am vaguely aware, but do not follow closely.

OK, you got me, you do take risks, just not material ones. However I stand by my broad conclusion that you are a highly, perhaps irrationally so, risk adverse investor. Circa September 2015 I think:

"Close. No real estate. As of today, I am

6% gold/silver including CEF.A
6% stocks
23% GICs
26% cash & savings <-- must reallocate
39% bonds, mostly govt"

Which is fine, for you give your life history, earnings potential, and job insecurity. It just has little to no bearing on the rest of us as being a sensible way forward. Your view of the investing landscape is highly unique and eccentric.

BTW, I have 18% financials and 16% big 5 banks. Used to be around 25%, which was still under TSX weighting. Is that an irrational love of banks? My dividends are down > $20K PA of late and portfolio currently yields 2.1%. Is that an irrational pursuit of dividend stocks? I don't slavishly marry to much investing wise, I adapt to the surroundings.

hboy43


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## Oldroe

Lies caught lying 30-40 times.


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## Money172375

Any insights into BNS? 5 year return is negative while the other Big 4 are up 10-25%.


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## milhouse

I think a lot of it has to do with where their international operations are located. While there's overlap geographically, IMO the ones with a heavier presence in the US has benefited. Whereas BNS has struggled a bit with their international operations, particularly in the Caribbean and South America with the hope that emerging markets would provide better growth. A slower restart from Covid in those areas versus North America likely didn't help either. 
From the sounds of their recent earnings calls/reports there does seem to be hope that things are slowly turning around but I wouldn't expect anything quick. 
Disclosure: I hold some BNS.


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## AltaRed

I hold BNS as well, primarily as an offset to BMO, TD and RY that are heavily invested (to varying degrees) in the USA. Folks have had a love affair with US stocks, if not the S&P500, for a decade or more (recency bias) but there is no assurance the dice will keep rolling that way. I hedge that bet with the likes of BNS that could surprise on the upside. I don't make big bets (bet the farm) on only a few sectors or big names given family responsibilities to be prudent in providing a strong future for them. IOW, diversification, at least to some degree, even if it could (likely) cost something in CAGR performance long term.


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## londoncalling

I have held BNS for years and it is my 2nd largest Canadian bank holding. I bought it for its geographic exposure. For the same reasons I have smalls positions in the UK (LYG) and a couple US regional banks for similar reasons. Recently, I have considered selling the US regionals as I already have exposure to the US through TD,RY and BMO. For the time being I am holding and letting the US divvies collect for other US stock purchases.

As to the 5 yr return being negative: that only matters if you bought 5 years ago. Even then it doesn't matter that much. It is more important what it will do in the next five years.


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## cainvest

londoncalling said:


> As to the 5 yr return being negative: that only matters if you bought 5 years ago. Even then it doesn't matter that much. It is more important what it will do in the next five years.


The 5 yr being negative only matters if you're selling at this moment. IIRC, BNS has consistantly kicked out a higher dividend than the other big banks if that is important to you. As mentioned, BNS is just one of the CDN banks to own but certainly not the only one to own for various reasons.


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## doctrine

Money172375 said:


> Any insights into BNS? 5 year return is negative while the other Big 4 are up 10-25%.


BNS 5 year total return is about +20%. The share price is down but the 5% per year dividend more than makes up for it, now 5.7%.

I would say buying BNS at a P/E of 8 and a 5.7% dividend yield gives you plenty of margin of error for a 30-40% return over the next 5 years.


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## Money172375

doctrine said:


> BNS 5 year total return is about +20%. The share price is down but the 5% per year dividend more than makes up for it, now 5.7%.
> 
> I would say buying BNS at a P/E of 8 and a 5.7% dividend yield gives you plenty of margin of error for a 30-40% return over the next 5 years.


Ah yes. I was focused on the share price.


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## GGuy

doctrine said:


> BNS 5 year total return is about +20%. The share price is down but the 5% per year dividend more than makes up for it, now 5.7%.
> 
> I would say buying BNS at a P/E of 8 and a 5.7% dividend yield gives you plenty of margin of error for a 30-40% return over the next 5 years.


Was getting ready to pull the trigger on a 5 year GIC now at 5% and also some more BNS. The 5.7% yield and potential total return is making me rethink my allocation. Less GIC and more BNS. A nice quandry to have atm.

Lots of factors, including if one believes the banks are never going to cut dividends which is a whole other debate but I'm comfortable with banks.


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## GGuy

Double post. Sorry!


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