Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
HSBC (HSBC) is headquartered in London, and is in the Finance sector. The stock has seen a price change of 16.88% since the start of the year. The bank is paying out a dividend of $2.24 per share at the moment, with a dividend yield of 9.77% compared to the Banks - Foreign industry's yield of 2.92% and the S&P 500's yield of 1.39%.
Looking at dividend growth, the company's current annualized dividend of $8.98 is up 173.8% from last year. Over the last 5 years, HSBC has increased its dividend 3 times on a year-over-year basis for an average annual increase of 41.32%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. HSBC's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
HSBC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $8.48 per share, which represents a year-over-year growth rate of 12.32%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HSBC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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HSBC Holdings plc (HSBC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).