Scotiabank Hikes Its Dividend Despite a Big Drop in Profits
Big banks often make for great dividend stocks because they are generally highly profitable and can afford to make increases to their payouts. Top Canadian bank Scotiabank (TSX:BNS)(NYSE:BNS) announced its second-quarter earnings last week with net income of $2.2 billion down over 20% for the period ending April 30.
The economy has been struggling and Scotiabank has been setting aside more money for bad loans as a result of a troubling outlook. But the picture isn't bleak enough for the company to suspend its dividend or even to stop raising it. Instead, Scotiabank announced that it would be raising its quarterly dividend by three cents to $1.06. It's a modest-sized increase but a testament to the stock's overall stability. Scotiabank has been paying dividends since 1833 and is one of the safest income stocks for investors to own.
At 6.2%, it currently offers a great yield thanks not only to its strong performance and increases to the payout, but because its stock is also trading near a 52-week low. With the stock struggling as investors have been down on bank stocks, that has pushed Scotiabank's yield up. On a $25,000 investment in the bank stock, you could be collecting around $1,550 per year just from its dividend.
And over the long haul, the stock is likely to rise in value as this is a solid business to invest in. For investors, now can be an excellent time to load up on the stock. Although it may not look like a great buy right now given the uncertainty in the economy, this is the type of investment you can buy and hold for decades.
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