We recently compiled a list of the 10 Best Bank Stocks With High Dividends. In this article, we are going to take a look at where HSBC Holdings plc (NYSE:HSBC) stands against the other bank stocks.
In 2023, the US banking industry took a major hit, as Silicon Valley Bank collapsed, followed by the downfall of two other major banks. It was the biggest shake-up the industry had seen since the 2008 financial crisis. Despite the US banking crisis, the past two years have been the best for banks since before the Great Recession. Shocking, right?
Banking Sector Performance 2023
According to McKinsey, banks made $7 trillion in revenue and $1.1 trillion in net income globally during 2023, with a return on tangible equity of 11.7%. They have also strengthened their capital and liquidity, with capital levels at 12.8% and liquidity at 77.2%, both improving from 2022. In fact, banks earned more profit than any other sector worldwide last year. Right now, 14% of banks are making up 80% of the industry’s economic profit, which is a big jump from 11% in 2013. This is nearly five times higher than most other industries, where a few big players usually dominate the performance.
In 2023, global dividends surged to a record $1.66 trillion, marking a 5.0% increase on an underlying basis, according to the Janus Henderson Global Dividend Index. The banking sector played a key role in this growth, delivering record payouts and accounting for half of the global increase in dividends. Higher interest rates allowed many banks to expand their margins, with emerging market banks contributing significantly to this increase – though banks in China didn’t join in the dividend boom.
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Banking Sector in 2024
The banking sector is anticipated to maintain its strong performance this year, with analysts offering an optimistic outlook. On December 4, 2024, Moody’s upgraded the global banking sector from negative to stable. The credit rating giant is positive because G-20 countries are easing up on interest rates and making some monetary adjustments, which should help with the asset quality and liquidity of banks. The economy seems to be stabilizing, and that should help banks recover, especially in terms of deposits. Of course, there are some risks like geopolitical tensions, trade issues, and possible shifts in the US policies under the new president could create uncertainties that might affect the global economy and the banking sector. So, while things are looking better, there is still some uncertainty on the horizon.
Our Methodology
For this article, we used the Finviz stock screener to filter out bank stocks with dividend yields exceeding 3%. We focused on picking stocks with a consistent record of paying dividends, offering dividend growth, and being financially stable to steer clear of yield traps. The list below is ranked in the ascending order of dividend yields, as of December 6. We have also mentioned the number of hedge fund holders in each firm, which was sourced from Insider Monkey’s Q3 2024 database.
At Insider Monkey, we are obsessed with 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)
Dividend Yield as of December 6: 4.16%
Number of Hedge Fund Holders: 14
HSBC Holdings plc (NYSE:HSBC), ranking 6th on our list of the best bank stocks, provides a wide range of financial services, including retail banking, wealth management, global asset management services, commercial lending, investment management, and private wealth solutions.
Although HSBC Holdings plc (NYSE:HSBC) is a globally diversified company, its operations are largely driven by one region: Asia, which accounts for about half of its revenue. The other half of HSBC’s business comes from various countries, generating income through services like commercial banking and wealth management. Recently, the company has also taken steps to further strengthen its focus on Asia.
HSBC Holdings plc (NYSE:HSBC)’s Q3 revenue came in at $17 billion, up $1.1 billion from the same quarter last year and $0.3 billion higher than the previous quarter, showing positive momentum in the business. The bank also announced $4.8 billion in shareholder returns, which includes a third interim dividend of $0.10 per share and a share buyback of up to $3 billion. HSBC plans to wrap up the buyback ahead of full-year results in February. After a steady third quarter and with a low PE ratio, the stock looks undervalued and ready for growth.
HSBC Holdings plc (NYSE:HSBC) is making big changes to streamline its operations and tackle concerns about growth in a challenging market. They’re planning senior-level job cuts, aiming to save $300 million, and have reorganized their banking structure by merging commercial and institutional banking under Michael Roberts, while creating a new wealth division led by Barry O’Byrne. Starting January 2025, the bank will split into East and West divisions, with Hong Kong and the UK operating independently.
Billionaire Ken Griffin’s Citadel Investment Group is the leading position holder in HSBC, owning 687,682 shares worth $31 million as of September 2024. Overall, HSBC Holdings plc (NYSE:HSBC) stock was held by 14 hedge funds in the third quarter.
Overall HSBC ranks 6th on our list of the best bank stocks with high dividends. While we acknowledge the potential of HSBC as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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.