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When we invest as we approach retirement, or even after retiring, we should look to buy stocks that can provide us with a regular income stream.
That’s because investing allows us to buy dividend stocks that can replace, to some extent, the loss of income once we stop working.
The great thing about dividend stocks, more broadly, is that the dividend payments are actually tax-free in Hong Kong. That means individual investors don’t have to pay any income tax whatsoever on dividends received.
Luckily for retirees, there are many solid dividend stocks to choose from in the Hong Kong market. Here, I’ll outline three Hong Kong dividend stocks that retirees will love.
1. HKT Trust
The telecommunications and broadband operator HKT Trust and HKT Ltd (SEHK: 6823) is a reliable dividend payer. HKT Trust owns the recognisable telco brands 1010 and csl in Hong Kong and has continued to perform admirably even amid the protest last year in Hong Kong.
In 2019, the firm managed to rack up revenue of HK$29.7 billion (US$3.8 billion) – up by 1% year-on-year.
It also pays a hefty dividend per share (DPS) of HK$0.7038 and gives potential dividend investors a yield of 6.2% on a trailing 12-month basis. That’s a solid yield for those of us who are retired and worried about where we can generate a passive income.
2. BOC Hong Kong
Hong Kong-based bank, and one of the three note-issuing banks in the city, BOC Hong Kong (Holdings) Ltd (SEHK: 2388) also makes the list given its reliable and consistent track record of paying a dividend.
Retirees tend to like banks given they pay out good dividends. Of course, that isn’t the case for HSBC Holdings plc (SEHK: 5), which had to suspend its dividend recently, but players such as BOC Hong Kong and Hang Seng Bank (SEHK: 11) are safer dividend bets.
BOC Hong Kong will likely face some headwinds this year but the bank should be able to meet its DPS of HK$1.537 that it paid out for the 12 months ended 31 December, 2019.
That’s because its dividend payout ratio was only around 50% in 2019, meaning if earnings do drop then the bank should still be able to comfortably pay out its dividend.
At BOC Hong Kong’s current price of HK$24.40, its shares are offering retirees an attractive dividend yield of 6.3%.
3. Power Assets
The household power and electricity provider Power Assets Holdings Ltd (SEHK: 6) is a Hang Seng Index constituent stock and has been a dividend stalwart for some time.
It has a diverse range of power-generating assets in different markets, including Hong Kong, the UK, Canada, Australia, Thailand and mainland China.
For retirees, the dividend is one we want to focus on though. Here, the company does well. Even though it hasn’t grown its dividend in recent years, it has remained stable.
A power-generation business is generally seen as a conservative income investment and that’s exactly what we want as retirees. In 2019, Power Assets announced a DPS of HK$2.80.
With its share price, at the time of writing, at HK$43.40, Power Assets shares offer investors a solid dividend yield of 6.5%.
As income investors, we want to be able to rely on our companies to pay dividends on a regular basis. However, as retirees we also rely on them to be sustainable.
HKT Trust, BOC Hong Kong and Power Assets are all solid dividend-paying stocks that retirees can consider when thinking about generating passive income streams.
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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 Tim Phillips doesn't own shares in any companies mentioned.