Here are the updated 2024-26 dividend forecasts for HSBC shares

Following publication of the bank’s 2023 results on 21 February, our writer’s been looking at the HSBC dividend forecast for the next three years.

| More on:
Man putting his card into an ATM machine while his son sits in a stroller beside him.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As a shareholder in HSBC (LSE:HSBA) I’m keen to know what the bank’s dividend forecast is up to 2026, and how much passive income I could generate over the period.

Seeing into the future

According to the 16 analysts covering the stock, the dividend per share over the next three years will be $0.60 (2024), $0.62 (2025) and $0.64 (2026).

The 2024 figure excludes the special dividend that’s been promised following the sale of the bank’s division in Canada. It’s already been confirmed that once the deal is finalised, a payment of $0.21 a share will be made. Although the timing is still uncertain, it’s expected to be in the first half of the year.

Reasons to be more optimistic

But I think the ‘experts’ have underestimated the 2024 payout.

That’s because at the same time as announcing the bank’s 2023 results, the directors reconfirmed their commitment to return 50% of earnings to shareholders, by way of dividends.

And while the analysts’ forecasts broadly reflect this payout ratio in 2025 (51.7%) and 2026 (50.8%), they’re more conservative in 2024.

The average of their predictions is for earnings per share (EPS) this year of $1.40. A dividend of $0.60 means the bank would be returning ‘only’ 42.9% to shareholders.

With the bank promising a dividend equal to 50% of earnings, I’m expecting to receive $0.70 in 2024.

If I’m correct and the analysts predictions for 2025 and 2026 come true, shareholders will receive 153.2p ($1.96) per share over the next three years, plus the one-off Canadian bonus of 16.4p ($0.21). This means someone investing £10,000 today could receive £2,892 in dividends during this period.

Excluding this year’s special dividend, the bank’s shares are currently yielding over 8%. The average for the FTSE 100 is 3.9%. If HSBC’s was the same, it would return £1,722 less to shareholders over the next three years.

To further boost shareholder sentiment, I’m sure the directors will point to their recently announced $2bn share buyback programme.

Personally, I’d rather have the cash in my hand.

Final thoughts

Despite all this positivity, I’ve invested for long enough to know that dividends are never guaranteed. It was only three years ago that the bank’s payout was (in cash terms) less than half what it is today.

And to continue to pay generous dividends, it must perform in line with forecast.

With its origins in Hong Kong, HSBC has significant exposure to the Chinese real estate market, which is currently in crisis. But the group doesn’t appear to be too concerned, although the majority of the increase in its provision for bad loans in 2023 was due to the sector.

Economists appear to agree that the next move in interest rates in most major economies is going to be downwards. This is likely to reduce HSBC’s revenue and margin. But the threat of loan defaults should recede.

Overall, I think the bank remains in good shape with a strong balance sheet, excellent reputation and an unmatched global footprint. These factors could help ensure that it continues to pay dividends at levels higher than most of its peers.

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. James Beard 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.

More on Investing Articles

Bronze bull and bear figurines
Investing Articles

1 dividend superstar I’d buy over Lloyds shares right now

I sold my Lloyds shares recently and have used some of the proceeds to buy more of this high-yielding dividend…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£20,000 in savings? Here’s how I’d try to turn that into a £43,960 annual passive income!

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends can generate significant passive income over time.

Read more »

Sun setting over a traditional British neighbourhood.
Investing Articles

Could I make shedloads of dividend income from 8,025 Kingfisher shares?

Some shares are better than others when it comes to earning dividend income. So how does this FTSE 100 do-it-yourself…

Read more »

Illustration of flames over a black background
Investing Articles

Are Thungela Resources shares brilliant for passive income?

There’s one share that’s recently been an excellent source of passive income. But ethical investors won’t want to touch the…

Read more »

Edinburgh Cityscape with fireworks over The Castle and Balmoral Clock Tower
Investing Articles

1 growth stock to consider buying at $1 that could be the next Nvidia

Attempting to find the next great growth stock may be like searching for a needle in a haystack. Still, here's…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

Should I buy these UK shares for my portfolio?

This Fool has been searching for ways to capitalise on the commodity moves via UK shares. Here’s what he’s watching.

Read more »

Illustration of flames over a black background
Investing Articles

Just released: April’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

A senior group of friends enjoying rowing on the River Derwent
Investing Articles

£9,000 in savings? Here’s a FTSE 100 stock I’d buy to target a £30,652 annual second income!

Our writer highlights one top FTSE 100 share that he thinks could help create a portfolio large enough for a…

Read more »