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Forget the top Cash ISA rate. I’d pocket 6.6% here

When I looked for a new Cash ISA just before Christmas, the top interest rate I could find with instant access was just 1.35%. Even if I was willing to tie up my cash for five years (I’m not) the highest rate available was just 2.03%.

I do have a Cash ISA, which I use for short-term savings and for my emergency fund. But I don’t keep my retirement savings in cash. If I did, I’d have no chance of hitting my savings goals.

In this article I’m going to discuss a FTSE 100 share yielding 6.6% that I would buy for a reliable cash income and for retirement saving.

A dividend heavyweight

As you’ll probably guess, most of my spare cash goes into my Stock and Shares ISA. This provides the same tax-free benefits as a Cash ISA, but it gives me the chance to earn much higher rates of return than I would in cash.

I prefer to invest in stocks that offer high dividend yields, as long as I think the dividend payouts are sustainable. One FTSE 100 stock I rate highly as an income choice is Asia-focused banking giant HSBC Holdings (LSE: HSBA).

This Anglo-Chinese bank has a market cap of £122bn and has been in business for more than 150 years. HSBC didn’t need a bailout during the financial crisis. And even during that extreme period of our financial history, it continued to pay a (reduced) dividend — unlike most UK rivals.

Low risk

HSBC is by far the biggest UK-listed bank. Its exposure to Asia adds complexity to the investment story, but I think it also provides a long-term opportunity. Asia — especially China — is a part of the world that’s developing fast and seems likely to continue growing.

For a UK-based investor like me with no special insight into Asian markets, investing directly in Asia could be risky. But owning shares in London-based HSBC gives me exposure to the same markets, with much less risk.

Indeed, low risk is one of the main attractions of this share, in my view. HSBC’s size means that it’s struggling to grow in today’s low-interest-rate world. But this global banking group is still in pretty good health.

The bank’s latest results show that its adjusted pre-tax profit rose by 6.8% to $12.5bn during the first half of 2019. Return on average tangible equity, a measure of profitability, rose from 9.7% to 11.2%.

Why I’d buy HSBC today

HSBC admits that current market conditions are making it difficult to achieve further gains. But for me, this isn’t the point. The bank is profitable enough and is returning some of its spare cash to shareholders through share buybacks ($1bn this year) and dividends.

Interim chief executive Noel Quinn is taking an active role in turning things around, and seems likely to be confirmed as permanent boss next year.

In the meantime, the shares are trading at a discount of nearly 10% to their book value and offer a well-supported 6.6% dividend yield. That looks good value to me. If I didn’t already own enough bank stock, I would be buying these shares.

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Roland Head 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.