If I invest £10,000 in HSBC shares, how much passive income would I receive?

Shares of FTSE 100 banking behemoth HSBC are carrying a very juicy dividend right now. Here’s why I’m investing for passive income.

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There are many dividend shares on the London Stock Exchange offering enormous yields. All have the potential to generate dependable passive income for my portfolio.

In my opinion, a great stock to consider buying right now is FTSE 100 heavyweight HSBC (LSE: HSBA). It’s a truly global bank with a particular focus on Asia, the world’s fastest-growing region.

The stock is a recent addition to my own portfolio. And it’s one I intend to put more money into during March.

But what if I had £10,000 to invest in the bank stock right now? How much passive income could I expect to receive? Let’s find out.

A strange five years

As I write, the HSBC share price is 596p (or £5.96). That’s slightly below where it was five years ago, meaning it has underperformed the wider FTSE 100 index on a price basis.

However, within this period, the stock more than doubled from a pandemic low of 283p.

Naturally, banks are cyclical stocks whose performance is closely tied to broader economic cycles. And this is reflected in HSBC’s recent dividend record, which has been erratic due to the economic disruptions of the pandemic.

YearDividend per share
2025 (forecast)$0.62
2024 (forecast)$0.79*
2023$0.61
2022$0.32
2021$0.25
2020$0.15
2019$0.30
2018$0.51
*includes a special dividend of $0.21 per share

High-yield passive income

As we can see above, the current forecast dividend for 2024 is $0.79 (62p at current exchange rates).

This includes a special dividend of $0.21 per share to be paid in the first half following the sale of HSBC’s Canadian business. This is a one-off bonus and won’t be repeated in 2025.

Based on today’s share price, this implies a meaty 10.4% dividend yield. Therefore, I could expect to receive £1,040 in annual passive income from a £10,000 investment.

In 2025, this would drop to around £820, assuming broker forecasts prove accurate. That’s still a very attractive return, especially if the share price rises too.

Of course, it’s always worth remembering that no dividend is certain. Though I note that HSBC’s dividend payout ratio is expected to be 50% for 2024. This ratio shows how much net income is expected to be paid out versus the amount retained for other uses.

This suggests the dividend is easily affordable, assuming no nasty surprises crop up. Which brings me to China.

Asia growth story

On 21 February, HSBC reported a record annual pre-tax profit of $30.3bn, a 78% year-on-year rise, as it benefited from higher interest rates.

However, this was overshadowed by a shock $3bn charge on its stake in a Chinese bank as bad loans increased across the country.

To be sure, the ongoing property crisis in China remains a worry, despite management saying the worst may have passed.

On the flip side, this has left the stock dirt cheap with a very high yield. And as a long-term investor, my focus stretches beyond the next few quarters to the long-term growth opportunity across Asia.

The region is expected to flourish as consumer middle classes expand and incomes rise. Demand for banking services should grow in tandem, underpinning rising profits and dividends for HSBC.

As such, I see this as a fantastic income stock to buy for my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Ben McPoland has positions in HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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