{"id":87226,"date":"2023-11-21T18:30:03","date_gmt":"2023-11-21T23:30:03","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/is-hsbc-a-good-choice-for-dividend-investors-nysehsbc\/"},"modified":"2023-11-21T18:30:05","modified_gmt":"2023-11-21T23:30:05","slug":"is-hsbc-a-good-choice-for-dividend-investors-nysehsbc","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=87226","title":{"rendered":"Is HSBC A Good Choice For Dividend Investors? (NYSE:HSBC)"},"content":{"rendered":"
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As one of the UK\u2019s leading banks, HSBC (NYSE:HSBC<\/span>) needs little in the way of an introduction.<\/p>\n

All I\u2019ll say in these opening remarks is that HSBC is the third largest company in FTSE 100 and it\u2019s the largest bank in the FTSE 100 by a considerable margin.<\/span><\/p>\n

It\u2019s also a favourite with income funds and dividend investors and, with its share price at \u00a36.15, it has an attractive dividend yield of 4.2%.<\/p>\n

That combination of size and yield puts HSBC in 22nd place on my list of top UK dividend stocks, so I think it’s worth looking at this bank in a bit more detail.<\/p>\n

HSBC\u2019s share price is low relative to earnings and dividends<\/h2>\n

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\"HSBC <\/picture>
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HSBC’s share price hasn’t exactly set the world on fire these last ten years. In fact, the share price is down slightly since 2013, and that’s one reason why the dividend yield is a not insignificant 4.2%.<\/span><\/p>\n

The FTSE All-Share (at 4,088) has a dividend yield of 3.9%, so HSBC\u2019s yield is slightly above the market average, which is a good place to start.<\/p>\n

As well as comparing the share price to last year’s dividend, it’s also a good idea to compare it to the company’s average <\/em>dividend from the last ten years. The resulting PD10 ratio<\/em> comes in at 18, which is comfortably below the FTSE All-Share average of 30.<\/p>\n

Turning to earnings, HSBC’s price-earnings ratio is 10, which is quite low. However, earnings are volatile enough to make the standard PE ratio an unreliable measure of value. That’s why I prefer the PE10 ratio, which compares today\u2019s share price to the company\u2019s average earnings over the last ten years.<\/p>\n

In this case, HSBC\u2019s PE10 ratio is 14, which is below the FTSE All-Share average of 18.<\/p>\n

And so, on this very limited evidence, it seems that HSBC\u2019s share price is<\/em> low relative to its earnings and dividends.<\/p>\n

But is this low price justified because this is a low-quality company, or are we looking at a high-quality company whose shares are being undervalued by an overly-pessimistic stock market?<\/p>\n

To answer that, let’s have a look at HSBC’s financial track record, starting with growth.<\/p>\n

Consistent dividend growth has been lacking<\/h2>\n

Quality dividend stocks usually produce relatively consistent growth over long periods of time.<\/p>\n

For banks, I want to see reasonably consistent growth across three key numbers on a per-share basis:<\/p>\n

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  1. Shareholder equity<\/strong> (as this is the foundation upon which the business stands)<\/li>\n
  2. Assets<\/strong> (as this tells us whether the bank is lending more to its customers)<\/li>\n
  3. Dividends<\/strong> (as dividend investors obviously want to see dividends growing ahead of inflation)<\/li>\n<\/ol>\n

    Unfortunately, HSBC has utterly failed to produce consistent inflation-beating growth over the last decade.<\/p>\n

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    \"HSBC <\/picture>
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    SharePad<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    Taking each of those three key numbers in turn:<\/p>\n