In my Scotiabank (BNS) Is A Terrible Long-Term Investment post at Dividend Power, I explain why investors might want to cast their net wider.
I last reviewed Scotiabank (BNS) in my August 25, 2022 'Avoid Scotiabank Despite Its Attractive Valuation' post on this site. In the Final Thoughts segment of that post, I indicate that selling some BNS shares held in retirement accounts is at the 'top of my mind'. As it turns out, I did liquidate a sizable portion of my BNS shares. BNS was my 17th largest holding when I completed my Mid 2022 Investment Holdings Review. Now, it does not fall within my top 30 holdings.
BNS, Canada's most international bank, opted years ago to take a different path from its peers. Rather than expand into the saturated US market, BNS chose to expand in Mexico, Peru, Chile and Colombia. The demographic trend that reflected a growing middle class was an important factor in the decision-making process.
Although these may be attractive markets in some respects, investors need to look at the risk aspects of these countries. These countries (for the most part) rank poorly when it comes to corruption, credit risk, and economic freedom.
For example, look at Mexico. The 2022 Index of Economic Freedom assigns rankings to various metrics and Mexico's Rule of Law receives abysmal ratings (Worst (0) and Best (100)):
- Property Rights: 47.7
- Judicial Effectiveness: 40.7
- Government Integrity: 32.0
Peru and Colombia do not fare much better!
AND these 3 countries are CORE markets!?
In my guest post, I also include links to sites which rank countries on other metrics.
While I only touch upon BNS's Core countries, look at BNS's Corporate site to see a list of other countries. Plug some of these countries into the search fields of the sites that rank countries on various metrics; the links are provided in my guest post.
While some of these countries may have respectable rankings, we must remember that BNS's exposure to some of these countries is minimal (eg. Bonaire, Japan, Turks and Caicos, Curaçao).
Although BNS's dividend metrics might currently be appealing, investing based on dividend metrics is foolish. Investors would be wise to try and determine an investment's potential long-term investment return and to gauge whether the potential return is commensurate with the credit risk. In my opinion, there is a huge disconnect between risk and return when it comes to BNS.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long BNS.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
In my Scotiabank (BNS) Is A Terrible Long-Term Investment post at Dividend Power, I explain why investors might want to cast their net wider.
I last reviewed Scotiabank (BNS) in my August 25, 2022 'Avoid Scotiabank Despite Its Attractive Valuation' post on this site. In the Final Thoughts segment of that post, I indicate that selling some BNS shares held in retirement accounts is at the 'top of my mind'. As it turns out, I did liquidate a sizable portion of my BNS shares. BNS was my 17th largest holding when I completed my Mid 2022 Investment Holdings Review. Now, it does not fall within my top 30 holdings.
BNS, Canada's most international bank, opted years ago to take a different path from its peers. Rather than expand into the saturated US market, BNS chose to expand in Mexico, Peru, Chile and Colombia. The demographic trend that reflected a growing middle class was an important factor in the decision-making process.
Although these may be attractive markets in some respects, investors need to look at the risk aspects of these countries. These countries (for the most part) rank poorly when it comes to corruption, credit risk, and economic freedom.
For example, look at Mexico. The 2022 Index of Economic Freedom assigns rankings to various metrics and Mexico's Rule of Law receives abysmal ratings (Worst (0) and Best (100)):
- Property Rights: 47.7
- Judicial Effectiveness: 40.7
- Government Integrity: 32.0
Peru and Colombia do not fare much better!
AND these 3 countries are CORE markets!?
In my guest post, I also include links to sites which rank countries on other metrics.
While I only touch upon BNS's Core countries, look at BNS's Corporate site to see a list of other countries. Plug some of these countries into the search fields of the sites that rank countries on various metrics; the links are provided in my guest post.
While some of these countries may have respectable rankings, we must remember that BNS's exposure to some of these countries is minimal (eg. Bonaire, Japan, Turks and Caicos, Curaçao).
Although BNS's dividend metrics might currently be appealing, investing based on dividend metrics is foolish. Investors would be wise to try and determine an investment's potential long-term investment return and to gauge whether the potential return is commensurate with the credit risk. In my opinion, there is a huge disconnect between risk and return when it comes to BNS.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long BNS.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
