The Motley Fool

The HSBC share price plummets! Is it a steal for investors?

Image source: Getty Images.

The HSBC (LSE: HSBA) share price has plummeted in value over the past 12 months. At the beginning of September 2019, the stock was changing hands for around £6. Today, it’s worth nearly half that. 

The company’s dividend has failed to compensate investors for this low return.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Earlier this year, HSBC was asked to suspend its dividend by regulators here in the UK. The move from regulators, which prompted outrage among shareholders, was designed to shore up the group’s balance sheet. 

I think this was a sensible decision. Even though the dividend suspension was disappointing, (the HSBC share price previously offered one of the biggest dividends in the FTSE 100) the bank needed to be cautious. We still don’t know how much of an impact the coronavirus crisis will have on the global economy.

Banks like HSBC have already been forced to write-off hundreds of billions of pounds worth of loans. Paying a dividend in such an uncertain environment could cause the business further headaches in the future. 

Unfortunately, at this point, it’s unclear if, or when, the company will restore its dividend. Management has said the payout will remain on ice until at least the end of 2020.

City analysts expect the dividend to be reintroduced next year at $0.30 per share. That implies a prospective dividend yield of 7% on the HSBC share price. 

Cheap shares

Aside from its dividend potential, there are other reasons why the stock looks attractive right now. Shares in the banking giant are currently changing hands at a price-to-book (P/B) value of just 0.5. That’s substantially below its long-term average of 1.

In theory, profitable businesses shouldn’t trade at a discount the value of their net assets. As such, it looks as if the HSBC share price offers a wide margin of safety at current levels. 

However, despite the company’s attractive valuation and dividend potential, there are some other reasons why investor sentiment towards HSBC could remain depressed.

HSBC share price sentiment

The banking giant’s exposure to Hong Kong, which was previously an advantage, has become a disadvantage. What’s more, the group’s international diversification, which also used to be an advantage, has become another disadvantage. 

As a result, HSBC could face some hard choices in the years ahead. Its Hong Kong business generates almost all of the group’s profits. Meanwhile, its European and US arms are struggling to break even.

Some analysts have speculated that the company might be better off abandoning these markets entirely, to focus on China. That’s one possible option. 

In the meantime, management is slashing costs via job losses. The group could also exit some unprofitable markets. This is likely to weigh on profitability in the near term, and could also impact HSBC’s dividend prospects. 

There are lots of moving parts here, and that means it’s challenging to establish whether or not the HSBC share price is an attractive buy at current levels.

The stock looks cheap, but the bank’s outlook is far from clear. On that basis, it may be best to own HSBC as part of a diversified portfolio. This would allow investors to profit from any upside but minimise downside risk if the business continues to languish.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves owns no share 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.