2 cracking dividend shares I’m eyeing for my portfolio

This Fool takes a closer look at two dividend shares he’s got on his watchlist. He believes they could make great additions to his portfolio.

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I love dividend shares. I think they’re a great way to build wealth and take a step closer to financial freedom.

With that in mind, here are two I love. If I had the cash, I’d add both for my portfolio today.

HSBC

First up is HSBC (LSE: HSBA). The stock has experienced large bouts of volatility this year. Its share price took a massive hit back in February after the bank released its 2023 results. However, it’s managed to recover since. Year to date, it has climbed a healthy 5.1%.

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Created with Highcharts 11.4.3HSBC Holdings PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

But even taking into consideration its recent up and down performance, I see real long-term value in HSBC. I’m most drawn in by its impressive 7.2% yield. That makes it the fifth-highest payer on the Footsie.

Last year the bank upped its payout by 90.6% from 32 cents per share to 61 cents. What’s more, shareholders are set to receive a special one-off dividend this year following the sale of its Canadian unit.

On top of the passive income on offer, the stock looks like great value, trading on a price-to-earnings (P/E) ratio of just 7.4. That’s below the FTSE 100 average of 11, highlighting there may be growing room in its share price.

Its price-to-book ratio, a more common metric used for banks, is 0.8 (where 1 is considered fair value).

There are a couple of threats I see to the HSBC share price. For one, its exposure to Asia could cause issues moving forward. The Chinese economy, which HSBC is invested in, hasn’t been growing at the rate we’ve seen over previous years. More specifically, its property market has been flagging.

But even so, I still like HSBC’s exposure to China and more widely Asia. It’s home to some of the most exciting economies in the world. Its growing middle class should also drum up plenty of new business for HSBC in the years to come.

Phoenix Group Holdings

Another stock I’m fond of at the moment is Phoenix Group Holdings (LSE: PHNX). Like HSBC, 2024 has been volatile for its shares. Nonetheless, it has still posted a 4.4% gain year to date.

Created with Highcharts 11.4.3Phoenix Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I mentioned above that HSBC is the fifth-highest yielder on the FTSE 100. One company that boasts a higher payout is Phoenix Group with its 9.6% yield.

That’s comfortably more than double the Footsie average of 3.6%. What’s even better is that its dividend has been on the rise in the last five years. Back then, it stood at 46.8p per share. Today, it’s 12.5% higher at 52.7p.

Like its Footsie counterpart, I see threats to Phoenix Group. For example, the insurance industry’s cyclical. Inflation and a high interest rate environment have seen the stock suffer at points over the last few years. A rise in inflation or delay in rate cuts would most likely see its share price pulled back.

But trading on a P/E in line with the FTSE 100 average, I see decent value in its shares. Despite potential challenges in the months to come, with a solid balance sheet and large customer base, I think Phoenix Group is in a strong position to withstand any threats.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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. Charlie Keough has no position in any of the shares mentioned. 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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