We recently compiled a list of the 10 Best FTSE Dividend Stocks To Buy Now. In this article, we are going to take a look at where HSBC Holdings plc (NYSE:HSBC) stands against the other FTSE dividend stocks.
The first half of 2024 has been notable for the UK equity market, as the FTSE 100, the benchmark index for UK company shares, hit a record high. However, stocks tumbled in the first week of June as financial shares mirrored broader losses in European markets. That was mainly due to the political uncertainty that unsettled investors and a slump in industrial mining stocks further dragged down the market. That said, with some time remaining in the general elections, there is still some potential for additional developments and surprises within the UK market. The index is up by nearly 6% this year so far, compared with a 14.3% return of the broader US market
The Bank of England (BoE) was one of the first central banks to begin increasing interest rates after the peak of the COVID pandemic. From December 2021 to August 2023, it raised the bank rate by 515 basis points to a 16-year high of 5.25% in order to address rising inflationary pressures in the economy. According to a Reuters poll of economists, the BoE is expected to begin cutting interest rates in August. Most economists also anticipate at least one more rate reduction this year, despite ongoing high inflation in wages and services. Yael Selfin, chief UK economist at KPMG, made the following comment on the situation:
“While we are seeing some tentative signs of cooling in the labor market, service sector inflation remains persistently high and it is likely the MPC would want to wait until the next set of forecasts and a few more data points before it embarks on its first rate cut.”
Overall, UK inflation is expected to remain slightly above the BoE’s target of 2.0% in every quarter until at least the end of 2025, according to the poll. Median forecasts indicated that inflation would average 2.5% this year and 2.2% next year.
After reaching new highs in 2024, the FTSE 100 may attract more investors, particularly those focused on income accumulation. The projected dividend yield of 3.8% for 2024 and 4.1% for 2025 is appealing, especially since these yields surpass the current inflation rate. Analysts predict that the ten largest dividend-paying companies in the UK will return £43.9 billion to shareholders, accounting for 55% of the total dividends from the FTSE 100. The top 20 companies are expected to contribute £57.4 billion, making up 72% of the total dividends.
In 2023, UK dividend growth of 5.4% aligned with the global average, according to a report by Janus Henderson. This increase was driven by substantial dividend increases from banks and oil producers, although it was tempered by lower payouts from mining companies. The report further mentioned that annual dividends in the UK grew to $86 billion in 2023 from over $63 billion in 2020.
While investors gravitate toward American dividend stocks, some of the best FTSE dividend stocks also offer similar investment opportunities.
Our Methodology:
For this article, we scanned through the list of FTSE stocks and picked dividend stocks from the list. From the resultant dataset, we picked the 10 best FTSE dividend stocks with the highest number of hedge fund investors tracked by Insider Monkey as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A financial specialist advising a corporate client at the trading desk of a high-stakes bank.
HSBC Holdings plc (NYSE:HSBC)
Number of Hedge Fund Holders: 17
HSBC Holdings plc (NYSE:HSBC) ranks eighth on our list of the best FTSE dividend stocks. The financial services company currently offers an interim dividend of $1.55 per ADS, which also includes a special dividend of $1.05 per ADR. This special dividend came from the profits gained by selling its Canadian banking operations to Royal Bank of Canada. The sale was concluded on March 28, 2024. Since then, the share price has surged by over 10%. As of June 11, HSBC supports a dividend yield of 7.04%.
HSBC Holdings plc (NYSE:HSBC) benefits a lot from its strong position in Asia. Recently, HSBC (China) finished acquiring Citi’s retail wealth management business in mainland China. This includes investment assets, deposits, and the customers associated with wealth management across 11 key cities in mainland China. In 2023, the bank saw significant growth in mainland China, with a 53% increase in invested assets and a 30% rise in its wealth client base compared to the previous year. In the first quarter of 2024, HSBC Holdings plc (NYSE:HSBC) in China nearly doubled its Net New Invested Assets (NNIA) compared to the same period last year, contributing to a 33% growth in Asia’s NNIA to $19 billion. These acquisitions tell us that the company is directing its attention toward a region where it generates approximately half of its revenue. However, due to geopolitical tensions and the GDP growth slowdown impacting the area, we believe that HSBC’s stock is trading at a discount. The stock has a forward P/E of 7.36.
In the first quarter of 2024, HSBC Holdings plc (NYSE:HSBC) reported revenue of $20.8 billion, up 3% from the same period last year. However, the company’s net interest income declined by $0.3 billion to $8.7 billion. Its strong profit performance, reaching $12.7 billion in the first quarter, has allowed the company to maintain its practice of rewarding shareholders. During the quarter, the company returned $8.8 billion to shareholders through dividends and share repurchases.
According to Insider Monkey’s database, 17 hedge funds owned stakes in HSBC Holdings plc (NYSE:HSBC) at the end of March, growing from 15 in the previous quarter. The consolidated value of these stakes is nearly $70.7 million.
Overall HSBC ranks 8th on our list of the best FTSE dividend stocks to buy. You can visit 10 Best FTSE Dividend Stocks To Buy Now to see the other FTSE dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of HSBC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HSBC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.