We recently compiled a list of 12 Best International Dividend Stocks to Buy Now. Since HSBC Holdings plc (NYSE:HSBC) is part of the list, we have analyzed the stock in detail.
As we move toward the second half of 2024, investors are eagerly preparing for the direction that the stock market will take for the remainder of the year. The first quarter of 2024 marked the broader market’s strongest performance for the first quarter since 2019. However, the question remains whether this trend will persist throughout the year. With geopolitical tensions, high interest rates, and higher prices, investors are looking for ways to diversify their portfolios. In this regard, international stocks, which usually fly under the radar, are the most favorable option to explore. And they become even more appealing when they pay dividends.
Dividend stocks are the bread and butter of a diversified portfolio. They have represented nearly 34% of the market’s overall return from 1940 to 2023, with even better performance during periods of high inflation. American companies are mainly known for paying dividends, but foreign counterparts are not far behind in this regard. Expanding your portfolio globally could help you avoid some of the specific challenges faced in the US. For instance, European banks are subject to tighter regulations, resulting in lower levels of interest-rate risk. With a more relaxed regulatory environment, dividends could potentially increase, and buybacks might rise in the international market. In fact, the markets with the highest yields are Norway, Hungary, Romania, and Iceland.
In 2023, Europe played a significant role in driving growth, with record dividend payouts growing by 10.4% compared to the previous year on an underlying basis, according to a report by Janus Henderson. The report further mentioned that annual dividends for the region grew from nearly $169 billion in 2020 to $301 billion in 2023. The trend is expected to continue this year as well as corporate leaders, especially in Europe and Japan, appear to be striking a balance between investing in capital expenditures and meeting operating cash flow requirements, while also showing an inclination to return cash to shareholders through dividends. According to FactSet data, European dividends per share are expected to grow at a CAGR of 8.5% by 2025.
There are no certainties in investing, of course. But we have compiled a list of some of the best dividend stocks from the international market to offer exposure to our readers.
Image by Steve Buissinne from Pixabay
Our Methodology:
For this list, we initially used a stock screener to identify foreign (non-U.S.) dividend stocks that are traded on US stock exchanges. Subsequently, from this dataset, we selected 12 stocks that boasted the highest number of hedge fund investors from Insider Monkey’s database of Q1 2024. The stocks presented in the article were then arranged in ascending order based on the count of hedge fund investors. 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).
HSBC Holdings plc (NYSE:HSBC)
Number of Hedge Fund Holders: 17
HSBC Holdings plc (NYSE:HSBC) is a London-based financial services and banking company that offers a wide range of related services to its consumers. On April 30, the company announced an interim dividend of $1.55 per ADS, which also includes a special dividend of $1.05 per ADR. This special dividend comes from the proceeds of selling its Canadian banking business to the Royal Bank of Canada, a transaction that was finalized on March 28, 2024. With a dividend yield of 7% as of June 3, HSBC is one of the best dividend stocks on our list.
In the first quarter of 2024, HSBC Holdings plc (NYSE:HSBC) reported revenue of $20.8 billion, which showed a 3% hike from the same period last year. However, the company’s net interest income fell by $0.3 billion to $8.7 billion. The stock has declined over the last two years amid investors’ concerns over a slowdown in Asia. The Chinese economy is expected to slow-down from a 5% increase in GDP in 2023 to 3.4% by 2028, according to a February report from the International Monetary Fund. Hong Kong’s economy is also struggling to get back on its feet after the pandemic with growth expected to decline to 2.8% in 2024 from 3.2% in 2023.
Nonetheless, HSBC powers on with its focus on the region. In addition to selling its Canadian banking business, HSBC Holdings plc (NYSE:HSBC) is on track to sell its business in Argentina this year and recent reports suggest that even sales of some German units are on the table. This is on top of the exits from countries like Russia and Greece, as well as other exits planned for the near future. The banking giant is currently searching for a new CEO and reportedly Asian expertise is a major factor in the selection process. Moreover, HSBC has recently agreed to acquire Citigroup Inc (NYSE:C)’s Chinese retail wealth management with the deal expected to close later this year.
In this way, HSBC is focusing on a region where it already generates a lot of money (more than half of its revenue) and the stock is trading at a discount due to concerns regarding geopolitical tensions in the region, as well as a slowdown in GDP growth. However, we believe these concerns are an overreaction, and taking into account the solid dividend yield, HSBC Holdings plc (NYSE:HSBC) looks like a bargain.
At the end of Q1 2024, 17 hedge funds tracked by Insider Monkey reported having stakes in HSBC Holdings plc (NYSE:HSBC), up from 15 in the previous quarter. These stakes have a collective value of nearly $70.7 million. Israel Englander remained bullish on the stock, boosting his stake in the company by over 1800% during Q1 2024.
Overall, HSBC ranks 12th among the best international dividend stocks. You can visit 12 Best International Dividend Stocks to Buy Now to see other dividend stocks from the international market. While we acknowledge the potential of dividend stocks, 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 as promising as NVIDIA 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.