Investing in dividend-paying stocks is a proven strategy for Canadians looking to build long-term wealth. And the Toronto Stock Exchange offers some solid choices. Among them, the Bank of Nova Scotia (TSX:BNS) and Innergex Renewable Energy (TSX:INE) stand out as reliable picks for 2025, combining stable dividends with growth potential. Both dividend stocks have recently released earnings reports, giving investors a clearer picture of their current health and future prospects.
Scotiabank, one of Canada’s “Big Five” banks, continues to demonstrate its strength despite a challenging economic environment. In its most recent earnings report for the first quarter of 2025, the bank posted a net income of $2.4 billion, or $1.76 per diluted share. This was an increase from $2.2 billion, or $1.69 per share, in the same quarter last year. The dividend stock’s performance was supported by robust results in its Global Wealth Management and Capital Markets segments, both of which delivered strong revenue growth. However, the bank also set aside $1.2 billion in provisions for credit losses, reflecting a cautious approach as higher interest rates continue to weigh on borrowers.
The dividend stock trades at around $70.86 at writing. With a forward price-to-earnings (P/E) ratio of 10.4 and a price-to-book ratio of 1.2, the dividend stock appears reasonably valued, particularly when considering its generous dividend yield. The bank offers a forward annual dividend of $4.24 per share, translating to a yield of 5.9%. This yield is well-supported by the bank’s healthy payout ratio of 72.2 %, suggesting there’s room for future dividend increases without compromising financial stability.
Looking ahead, Scotiabank is focusing on expanding its presence in the North American market. With an emphasis on the United States. The bank recently announced plans to acquire a 14.9% stake in Cleveland-based KeyCorp, a move aimed at strengthening its cross-border operations. This acquisition aligns with Scotiabank’s strategy of focusing on stable, low-risk markets while scaling back its exposure in riskier regions like Latin America. The bank’s leadership believes that this approach will provide more consistent earnings growth and better shareholder returns over the long term.
On the renewable energy front, Innergex Renewable Energy has been making strides despite industry-wide challenges. The dividend stock’s fourth-quarter 2024 earnings report showed net earnings of $33.2 million, surpassing analyst expectations. Revenue for the quarter came in at $286.1 million, reflecting strong operational performance across its wind, solar, and hydroelectric assets. This growth is encouraging, especially given the volatility in renewable energy markets over the past year.
Innergex’s stock has experienced a significant rebound, currently trading at $13.41, up nearly 54% from its recent lows! The company’s forward P/E ratio stands at 62.1, reflecting investor optimism about its growth prospects despite short-term profitability challenges. Innergex offers a forward annual dividend of $0.36 per share, yielding 4.1%. While the payout ratio appears high at 720%, it’s worth noting that renewable energy companies often reinvest heavily into new projects. This can temporarily inflate this metric.
Looking ahead, Innergex is projecting adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $825 million to $875 million for 2025, representing a 13% increase compared to 2024. The dividend stock also expects free cash flow per share to range between $0.75 and $0.95, a 10% increase at the midpoint from the previous year. This anticipated growth is driven by the completion of several renewable energy projects, including the Griffin Trail Wind Project in Texas and the Tonnerre battery storage project in France. Management remains optimistic about the company’s ability to sustain its dividend while continuing to expand its asset base.
Ultimately, both dividend stocks present compelling cases for long-term investors. Scotiabank’s steady dividends and conservative management make it a reliable core holding, while Innergex’s focus on renewable energy growth offers upside potential for those willing to tolerate some volatility. As always, investors should consider their personal risk tolerance and investment goals when deciding how to allocate their portfolios. But for those looking to build wealth through dividends in 2025 and beyond, Scotiabank and Innergex stand out as worthy contenders.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.
