A story oriented around banks and farmers would seem a great foundation for a mid-20th century Frank Capra-filmed morality tale, the evil and the good easily separated.

In this space this month, where we discuss our two best ideas for new money right now, we find the element of positive international exposure shared in common by two Canada-based companies that have proven themselves leaders in their particular industries.

Bank of Nova Scotia (TSX: BNS, NYSE: BNS) is No. 3 among Canada’s Big Five banks but No. 1 in terms of expanding its operations beyond its solid domestic franchise.

Ag Growth International Inc (TSX: AFN, OTC: AGGZF) is an agribusiness specialist focused on the development, manufacture and marketing of augers, conveyors, storage bins and conditioning (aeration, dryers) equipment for grain handling.

Both companies’ earnings profiles are diversified in terms of business lines and products as well as geography.

Bank of Nova Scotia–popularly known as Scotiabank–continues to expand its footprint, both geographically and within business lines, through organic growth opportunities as well as acquisitions.

It’s made over 30 acquisitions since 2007, including the CAD3.13 billion acquisition of ING Bank of Canada in August 2012 and the addition of a 51 percent stake in Colombia-based Banco Colpatria in January 2012 at a cost of just over CAD1 billion.

A diversified earnings base is Scotiabank’s primary strength, with solid distribution among its four operating units: Canadian Banking (33 percent), International Banking (25 percent), Global Wealth Management (19 percent), and Global Banking and Markets (23 percent).

But Scotiabank is also the most internationally diversified of Canada’s major banks, exposing it to attractive long-term growth prospects from emerging markets and providing diversification from the North American economic environment. It has a longstanding banking history in the Caribbean, strength in Mexico and operations in Central America, South America and Asia.

Total assets are up 27 percent since Oct. 31, 2011, the fastest pace among its domestic peer group. But Scotiabank has also been able to maintain solid returns during this period of expansion, with an average adjusted return on common equity of 17.4 percent for the five-and-a-half years beginning in 2008.

And it’s also been able to maintain asset quality, as its solid Canadian franchise has been complemented by provisions for bad loans that have risen in line with portfolio growth in Latin America.

Scotiabank generated a 10.9 percent increase in earnings during the first six months  of fiscal 2013, with strong earnings growth generated across its four core operating segments and 43 percent of the rise in earnings specifically attributable to acquisitions.

Canadian Banking generated the largest increase in earnings over the period, with earnings up 19.9 percent, as it benefited from the ING acquisition. Organic growth was particularly strong in consumer auto loans, which saw a 23 percent increase, and in residential mortgage lending, where it posted growth of 8 percent.

International Banking earnings grew 8.2 percent, with strong asset growth in Latin America, particularly with the acquisitions of Banco Colpatria and Crédito Familiar, and with higher contributions from associated companies, partially offset by a rise in provisions for credit losses.

Global Wealth Management delivered a 9.4 percent increase on higher assets under management and administration from favorable net sales, as well as improved capital markets, and from strong results in the insurance operation.

Global Banking and Markets posted 8.9 percent growth, primarily as a result of higher revenues in the fixed income and equities businesses, as well as across all of the lending businesses.

Strong cost-controls help it maintain reasonable profit levels even through periods of weak revenue, which favors Scotiabank relative to the rest of the Big Five in the current interest rate and economic environment. Scotiabank’s cost discipline has allowed it to maintain an average efficiency ratio of 55 percent over the past ten years, compared to an average of 66 percent for its Big Five peers.

In May 2013 Scotiabank announced that Rick Waugh will retire as CEO on Nov. 1, 2013. Brian Porter, the bank’s current president, will assume the CEO role, ensuring continuity.

Mr. Porter has extensive experience with the bank and has held a number of high-level roles across several of its operating units. A smooth transition is expected, with no shift in strategic direction anticipated as a result of the change.

Scotiabank has raised its dividend four times since the end of the Great Financial Crisis and is on track to boost it again when it announces fiscal 2013 third-quarter results on Aug. 27, 2013.

Scotiabank is well capitalized as measured under Basel III capital ratios, including a Common Equity Tier 1 (CET1) ratio of 8.6 percent and a Tier 1 ratio of 10.7 percent as of April 30, 2013.

Its capital ratios exceed regulatory requirements of the Office of the Superintendent of Financial Institutions (OSFI), with a current minimum of 7 percent for the CET1, which will subsequently rise to 8 percent for Scotiabank by Jan. 1, 2016, at the latest, given the bank was named as one of the domestic systemically important banks within Canada.

Now yielding a healthy and stable 4.1 percent, Bank of Nova Scotia, a new addition to the CE Portfolio Conservative Holdings, is a buy under USD60.

Ag Growth’s upside since late spring has been driven US Dept of Agriculture forecasts of a record corn harvest as well as expectations for solid farm income that will facilitate investment in new equipment.

The US Dept of Agriculture forecast a robust year for corn planting and a strong rebound in yields for the 2013 season. The USDA’s August crop report–due Monday, Aug. 12, is the first of the season in which corn data will be based on field observations rather than spreadsheet assumptions and weather.

A report consistent with prior forecasts should put pressure on corn prices and spur demand for farm equipment and storage.

US farm income, which is also expected to be at record levels, and international opportunities should also act as key drivers.

The company’s line of farm equipment ensures that production needs are met for large commercial and industrial-scale farms specializing in grain handling and storage.  Ag Growth has executed its growth-through-acquisition strategy over the past decade, incorporating all of the grain storage and handling value chain and combining specialty manufacturing into its business model.

A diversified product line will help the company capitalize on a rising trend in grain storage and handling demand as well as the potential for more volatile crop prices. The company’s focus on international sales should also contribute to not only diversifying its revenue seasonality but should also serve to add value by capturing larger, more industrial-scale grain handling operations in lesser served markets.

It boasts industry-leading profit margins that should improve based on its product and geographic exposures.

Ag Growth reported first-quarter numbers that reflected the severity of the 2012 US drought that devastated corn crops, as sales declined by 17.1 percent and adjusted earnings before interest, taxation, depreciation and amortization (EBITDA) fell by 40.4 percent compared to the first quarter of 2012. Earnings per share were down to CAD0.26 from CAD0.42 a year ago.

Ag Growth, which is yielding 6.5 percent, is a solid buy up to USD40.

For more information on Bank of Nova Scotia, go to How They Rate under Financial Services. Ag Growth is tracked under Natural Resources. Click on their US symbols to see all previous writeups in Canadian Edge and Maple Leaf Memo.

Click on the Toronto Stock Exchange (TSX) symbol to go to their Google Finance pages for a wealth of information, ranging from news releases to price charts. Click on their names to go directly to company websites.

Scotiabank is now the largest company in the CE Portfolio based on market capitalization, with a current value of CAD69.625 billion. Ag Growth is a smaller company, with a market cap of CAD465 milllion.

Both stocks have plenty of liquidity on both sides of the border, both in TSX and US-listed symbols.

Scotiabank trades on the New York Stock Exchange under the symbol BNS.

Ag Growth trades on the US over-the-counter (OTC) market under the symbol AGGZF.

Both companies have good coverage on Bay Street and Wall Street. Scotiabank has 21 analysts tracking it, with 13 rating the stock a “buy,” and six rating it a “hold” and two rating it a “sell.”

The average 12-month target price, based on forecasts from 16 of the 21 analysts covering the stock, is CAD64.75. This implies upside from Scotiabank’s Aug. 8, 2013, closing price of CAD58.03, not including dividends, of 11.6 percent.

Ag Growth is covered by 11 analysts, four of whom rate the stock a “buy.” Six rate it a hold, while one rates it a “sell.” The average 12-month target price, based on forecasts from nine of the 11 analysts covering the stock, is CAD36.89.

As is the case with all stocks in the Canadian Edge coverage universe, you get the same ownership whether you buy in the US or Canada. These stocks are priced in and pay dividends in Canadian dollars. Appreciation in the loonie will raise dividends as well as the value of your shares.

Dividends paid by both companies are 100 percent qualified for US income tax purposes. Both stocks’ dividends are taxed at the now-permanent Bush-era rates of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

Canadian investors enjoy favorable tax status for both companies. For US investors, dividends paid by both Scotiabank and Ag Growth into IRAs aren’t subject to 15 percent Canadian withholding tax, though they are withheld at a 15 percent rate if held outside of an IRA.

Dividend taxes withheld from US non-IRA accounts can be recovered as a credit by filing a Form 1116 with your US income taxes. The amount of recovery allowed per year depends on your own tax situation.