HSBC (LSE: HSBA) stock has been on a great run over the past five years. Like other FTSE 100 banks, it has more than doubled! Yet I think this dividend share is still worth considering for investors seeking passive income.
Here are three reasons why.
Market-beating yield
The most obvious attraction is the dividend yield, which stands at 5.6%. That beats Lloyds (4%), Natwest (3.9%), Barclays (2.6%), and Standard Chartered (2.5%).
Looking ahead to 2026, HSBC’s forward yield is 6%. Were someone to invest £5,000, the shares would throw off nearly £600 in dividends over the next couple of years.
And while dividends are never guranteed, these prospective payouts are covered twice over by expected earnings. This suggests that the forecast yield will be met.
The valuation also doesn’t look too stretched. Based on 2026 forecasts, the forward price-to-earnings ratio is 8.4.
Plenty of cash sloshing about
The second reason relates to HSBC’s solid operational performance. In Q1, Europe’s largest bank reported a pre-tax profit of $9.5bn, well above market expectations.
Performance was driven by its wealth division, which saw double-digit growth and strong client activity, particularly in Asia and Hong Kong.
That said, expected quarterly credit losses were higher than anticipated at $0.9bn. The bank noted “heightened uncertainty and a deterioration in the forward economic outlook due to geopolitical tensions and higher trade tariffs“.
The global trade situation is the biggest risk here. Some had assumed that we were over the worst of the tariffs shocks — then President Trump recommended a 50% levy on EU goods last week!
It’s almost impossible to know where things are heading next, but HSBC expects demand for lending to “remain muted” during 2025. No surprises there.
Yet the Asia-focused banking goliath still announced a new $3bn share buyback, on top of the $2bn completed during the quarter. So cash for the dividend shouldn’t be an issue, and HSBC looks well set up to weather any coming storms.
Solid long-term growth prospects
Over the medium to long term, the company expects mid-single digit percentage growth in customer lending balances. And it sees double-digit growth in fees and other income in its wealth division.
The reason for this is the region in which HSBC is increasingly focused. Most Asian economies have much higher growth prospects than more mature markets, especially in Europe.
The facts bear this out. Three of the top five global GDP economies are in Asia, namely China, Japan, and India. Many Gulf states are booming, while nearly 70% of global intellectual property filings now originate from Asian offices, according to HSBC.
In contrast, as has been widely reported, the wealthy are fleeing the UK en masse. Where are they heading? Last year, two of the top three destinations were in Asia (the United Arab Emirates and Singapore).
One of my best mates (an entrepreneur) is relocating to Dubai due to its lower taxes and more dynamic economy.
HSBC has disposed of assets in Argentina, Canada, and Europe to double down on the opportunity in the East, especially in wealth management. Over the long term, that should result in more opportunities, stronger growth, and higher dividends, ultimately.
As such, I expect to keep HSBC stock in my portfolio for many years. And I reckon it’s worth considering for passive income investors today.
