When a big name in Canadian banking drops in value, it tends to draw attention. That’s especially true when it’s a stock like Bank of Nova Scotia (TSX:BNS). It’s one of the country’s largest and most established financial institutions. BNS hasn’t had an easy ride over the past year. Rising interest rates, economic uncertainty, and a cooling housing market have all weighed on Canadian bank stocks. But when you look past the noise, BNS is starting to look like a solid opportunity for a rebound. Furthermore, one that comes with a generous dividend to boot.
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Recent history
At the time of writing, BNS stock is down roughly 11% from its 52-week high. While that kind of drop might be concerning on the surface, it can also present a buying opportunity for investors who are focused on long-term value. The stock trades at a price-to-earnings ratio of around 14.8. This suggests the stock may be undervalued relative to its earnings potential.
In its most recent earnings report for Q1 2025, BNS posted adjusted earnings of $2.2 billion, or $1.76 per share, which was above expectations. That beat was largely due to growth in non-interest income, which rose 15% year over year. While the bank’s international segment, particularly in Latin America, faced some headwinds, domestic operations held firm. BNS continues to make gains in wealth management and insurance, which are helping to diversify its revenue streams and reduce reliance on traditional lending.
A key reason why many investors are still holding onto BNS is the dividend. With a yield hovering near 6%, BNS offers one of the highest payouts among Canada’s Big Six banks. That’s a significant draw, especially for retirees and income-focused investors. The payout is well covered by earnings, with a payout ratio around 65%, which is in line with the bank’s long-term target. There’s also a long history of dividend stability. BNS hasn’t missed a payment since the 1800s, and while raises have been more modest recently, the bank continues to prioritize returns to shareholders.
Looking ahead
Looking at where the bank goes from here, there are reasons to be optimistic. Interest rates appear to be stabilizing and inflation has cooled, which could set the stage for more predictable conditions in 2025. That’s good news for financial institutions. Loan growth may not be what it was during the boom years, but fee-based revenue is becoming more important. BNS is investing in technology to improve digital banking and streamline operations, which could drive cost savings and improve efficiency over time.
Its international exposure, which has historically been a double-edged sword, may also turn into a growth engine once again. The bank has significant operations in Mexico, Chile, Peru, and Colombia. These are countries that are projected to grow faster than developed markets in the years ahead. While these markets come with higher risk, they also offer higher returns, especially as demand for banking and financial services increases with economic development.
Despite these tailwinds, investor sentiment has remained lukewarm. That’s actually what makes BNS attractive right now. When a fundamentally strong business trades at a discount because of temporary concerns, it often sets up for a rebound when those concerns fade. The recent earnings beat and analyst upgrades suggest that might already be underway.
Bottom line
For investors with a medium- to long-term horizon, BNS looks like a compelling choice. It offers stability, income, and the potential for capital appreciation. While it’s unlikely to deliver explosive growth, it doesn’t have to. This is the kind of stock that can quietly compound returns over time, particularly when bought at a discount. If you’re looking for a core financial holding in your portfolio, BNS might just be the rebound story worth watching in 2025.
