The Motley Fool

FTSE 100 stocks: a cheap UK dividend share I’d buy for my Stocks and Shares ISA

Image source: Getty Images

HSBC Holdings (LSE: HSBA) faces some significant headwinds that might crimp profitability, at least in the near term. But this UK banking share is still a FTSE 100 stock I’d be pleased to add to my Stocks and Shares ISA right now. I think it could deliver mighty returns through to the end of the decade.

A lumpy recovery in the global economy threatens the bounce-back of all cyclical UK shares like this. But for HSBC and the banks specifically, the need for central banks to keep interest rates locked around record lows — and to keep quantitative easing measures rolling to aid the recovery — poses an extra risk to the bottom line. Low interest rates squeeze profits as they narrow the rates at which banks lend to borrowers, and the rates that they offer to savers.

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...

I’m also concerned about the prospect of fresh trade wars between major economies. This is particularly problematic for HSBC as recent bickering over tariffs has revolved around the US and China. The Footsie bank sources around two-thirds of total revenues from Asia right now, a region that’s dependent on a strong Chinese economy.

Banking on Asia

However, as a long-term investor, HSBC still appeals to me. I’m particularly encouraged by the fact that analysts today expect China to return to the rampant economic growth of recent decades from 2021.

China and the surrounding areas look so lucrative, in fact, that this particular UK share plans to supercharge investment there. Today it affirmed its intention to “pivot to Asia” and announced a $6bn investment drive on the continent over the next five years. HSBC expects the drive to help deliver “double-digit growth” and to supercharge its wealth management and commercial banking arms specifically.

Image of person checking their shares portfolio on mobile phone and computer

The FTSE 100 firm’s planned hinge towards Asia is perhaps no surprise. HSBC has endured extremely low returns in the US and Europe in recent times. So it plans to strip down its operations in these developed markets to swivel to its high-growth markets.

There’s always a risk that the UK share’s huge investment in Asia will fail to deliver those much-hoped-for results. But things are looking good right now as the region’s personal income levels soar. KPMG reckons personal financial assets in the region will total $69trn by 2025 as the continent’s middle class grows. This will represent three-quarters of the global total, it estimates.

A top UK value share

City analysts expect HSBC to begin recording explosive earnings growth from 2021. A tough economic recovery in its established markets could blow estimates off course. But right now, forecasts suggest a 57% bottom-line rise in 2021. Another 31% profits increase is predicted for 2022 too.

As a consequence, I think HSBC is one of the tastiest FTSE 100 value shares out there. The bank trades on a forward price-to-earnings growth (PEG) ratio of 0.3. A reading of 1 and below can suggest that a UK share is undervalued. And on top of this. the company boasts big dividend yields of 5% and 5.9% for 2021 and 2022 respectively.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

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

Royston Wild 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.