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Dividend investors are generally seeking to invest in stable companies that can sustain dividend payments for a long time.
Moreover, they seek to acquire these companies at a relatively attractive valuation. Here, one of the main criteria of an attractive valuation is to have a high dividend yield.
In other words, we are looking for stable blue-chip companies that have above-average market yield.
But can we find such investments in the market now?
The answer is yes! Here are two such companies.
The Global Bank
The first company that we will explore here is HSBC Holdings plc (SEHK: 0005). As a quick introduction, HSBC is one of the largest banking and financial services organisation in the world, serving more than 39 million customers.
There are plenty of reasons to like HSBC as a dividend stock.
To start with, it has a long track record of paying dividends to its investors. Here some numbers to consider: In 1999, it paid a dividend per share (DPU) of US$0.34, which has grown over the next two decades to US$0.51 in 2018.
Moreover, it never once misses its dividend payment, even in the great financial crisis of 2009.
In addition to its strong dividend track record, HSBC is now trading at an attractive dividend yield of 6.5% (based on its latest share price of HK$ 60.85). Assuming that the bank can sustain its profitability for the next few years, investors will be pocketing a nice 6.5% return each year!
The Local Bank
The other company to look at is also a bank – Hang Seng Bank (SEHK: 0011).
For starters, Hang Seng Bank is one of the leading banks in Hong Kong. It is part of the HSBC Group, which holds a majority equity interest of 62.14% in the bank. Unlike HSBC Group, however, Hang Seng Bank focuses its business mainly in Hong Kong and mainland China.
As a local bank, the company’s stock price was badly affected in the last year, which could largely be attributed to the negative consequences of the protests in Hong Kong.
At HK$161, the bank’s stock has lost close to 25% of its market capitalization from the high of HK$ 212.6. This makes it stocks particularly attractive for dividend investors given its high yield of 4.7%.
Going forward, the company’s business performance, as well as investor sentiments, will likely be affected by the continued protests in Hong Kong. Nevertheless, we think this too shall pass, and the company’s long-term business fundamentals should remain intact.
2019 has not been a good year for both banks above.
Nevertheless, dividend investors might want to explore both companies now given their high dividend yield, as well as long term business prospects.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.