Should You Buy Bank of Nova Scotia (TSX:BNS) Stock Before its Earnings?

Bank of Nova Scotia could be an excellent pick ahead of its second-quarter earnings report for fiscal 2021.

| More on:

The biggest names in the Canadian banking sector are set to release their second-quarter earnings report in a few weeks. Most of the Big Six Canadian banks posted impressive first-quarter earnings figures, and it might be a good idea to consider looking at the banking sector ahead of the second-quarter earnings.

Today, I will discuss the Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). Scotiabank stock could be an ideal addition to your portfolio considering its 18.19% year-to-date increase at writing, among other factors.

How did the bank perform in Q1 2021?

Scotiabank delivered its first-quarter results for fiscal 2021 on February 23, reporting $2.41 billion in adjusted net income, translating to $1.88 per share. Its adjusted net income was up 3% from the previous quarter. Scotiabank had an excellent quarter, as economic conditions improved in Canada and worldwide.

The adjusted net income in its domestic operations rose to 1% to reach $915 million. The bank benefitted from lower provisions for credit losses and non-interest expenses. The bank is often considered an international bank due to its geographically diversified operations. It has a significant presence in Latin American countries. The bank’s operations in the region took a massive hit due to the economic fallout from the pandemic, but it has rebounded in recent months.

The Latin American market still has a lot of room to grow. Scotiabank’s adjusted net income from its international banking segment declined 35% on a year-to-date basis, offering much room for it to grow, as conditions improve in the region.

What can investors expect from its second-quarter performance?

Bank of Nova Scotia will release its earnings results for Q2 2021 on June 1, and it looks well positioned to benefit from a recovering market in Canada and Latin America.

The Bank of Canada anticipates strong economic growth in the second half of the year. Canada was behind its peers in the vaccine rollout early on but has since improved its inoculation rates. As vaccinations have increased, Canada has started seeing a steady drop in COVID-19 infections.

The improved economic growth could lead to rate hikes next year, but the country has challenges to face in the coming quarters. The Canadian economy lost over 200,000 jobs in April, out of which 129,000 were full-time jobs. A lack of a summer reopening could mean that the economy could miss out on an uptick.

However, Scotiabank and other major financial institutions in the country can still benefit from a booming housing market and improved savings rates for Canadians amid the global health crisis.

Foolish takeaway

At writing, Scotiabank is trading for $80.04 per share on the TSX, and it boasts a favourable 15.03 price-to-earnings ratio. The bank pays its shareholders at a juicy 4.50% dividend yield. Like most of its peers in the banking sector, Scotiabank has successfully recovered from the March 2020 pullback.

Scotiabank has uninterruptedly increased its dividends to shareholders by a CAGR of 6% since 2009. All these factors could make it an excellent stock pick ahead of its earnings.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Dividend Stocks

Paper Canadian currency of various denominations
Dividend Stocks

Should You Buy the 3 Highest-Paying Dividend Stocks in Canada?

A few dividend stocks saw a sharp correction in November, increasing their yields. Are they a buy for high dividends?

Read more »

money while you sleep
Dividend Stocks

Buy These 2 High-Yield Dividend Stocks Today and Sleep Soundly for a Decade

These stocks pay attractive dividends that should continue to grow.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

$15,000 Windfall? This Dividend Stock Is the Perfect Buy for Monthly Passive Income

If you get a windfall, after debt investing should be your next top option to create even more passive income!

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

3 Canadian Dividend Stocks for Worry-Free Income

These Canadian stocks have consistently paid dividends, generating a worry-free passive income for investors.

Read more »

people relax on mountain ledge
Dividend Stocks

Invest $10,000 in This Dividend Stock for a Potential $4,781.70 in Total Returns

A dividend stock doesn't have to be risky, or without growth. And in the case of this one, the growth…

Read more »

ETF chart stocks
Dividend Stocks

2 Top TSX ETFs to Buy and Hold in a TFSA Forever

Don't get crazy. Just think simple growth with these two ETFs that are perfect in any TFSA.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Use Your TFSA to Earn $900 Per Month in Tax-Free Income

This covered call ETF plus a TFSA could be your ticket to high tax-free passive income.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn a $15,000 TFSA Into $171,000

$15,000 may not seem like a lot, but over time that amount can balloon into serious cash.

Read more »