Two income stocks I’ve been watching closely for a while are HSBC (LSE: HSBA) and Plus500 (LSE: PLUS).
If I had £2,000 to invest, I could buy a total of 220 shares in both stocks. Splitting my pot down the middle, I could snap up 165 HSBC shares at 606p per share. The other half would buy me 55 Plus500 shares at 1,787p per share.
Here’s why I like the look of both picks!
HSBC
As one of the world’s leading banks, the past 12 months or so have been a tad difficult for HSBC. This is due to wide macroeconomic volatility. However, the business hasn’t been alone as many stocks, especially financial services stocks, have been impacted.
The shares have meandered up and down but are only down 1% over a 12-month period from 617p, at this time last year to current levels.
Recent turbulence has been a bit of a double-edged sword, in my view. Higher interest rates have helped boost HSBC’s coffers. At the same time, chances of defaults have increased too. Plus, HSBC’s key growth market, Asia, has been struggling due to a flagging Chinese economy. This is the main risk I’ll keep an eye on that could hurt future performance and returns.
As a long-term investor, short-term issues don’t worry me too much. HSBC’s longer-term outlook is favourable, in my opinion. Its focus on Asian markets, where there is potential for high growth, could help boost performance and returns, and where my bullishness stems from.
Finally, the shares look good value for money on a price-to-earnings ratio of just six. Plus, a dividend yield of 8% at present is attractive, and looks well covered based on the firm’s balance sheet. However, I’m conscious dividends are never guaranteed.
Plus500
Online trading platform Plus500 has some key bullish traits that attract me as a passive income seeker.
Before I dive into them, it’s worth noting that the shares are on a good run in recent months. Over a 12-month period, a rise of just 2% from 1,743p to current levels looks modest. However, since October 2023, the shares are up 42% from 1,254p, to current levels.
The first bullish trait I’m drawn to is the fact that Plus500 has no debt on its balance sheet. This is crucial, as it can reinvest its profits into the business for growth, and reward shareholders well if it chooses to do so. Next, the business has an excellent record of performance and growth. However, I’m conscious that past performance is not a guarantee of the future.
There are a couple of risks I’m wary of though. Firstly, competition is ramping up in the industry. This could hurt Plus500 as it looks to enter new markets for growth. A bad move could hurt its balance sheet, and potentially returns too. The other issue is that analyst forecasts profits could come under pressure next year. I’ll keep an eye on this as it could mean dividends are cut.
Finally, a dividend yield of 7.6% and the shares trading on a P/E ratio of just seven make the investment case even more attractive for me.
