HSBC Holdings (NYSE:HSBC) PLC, the London-based banking giant, has recently come under scrutiny due to concerns about its future growth prospects and the sustainability of its dividends. Despite its global presence and diverse offerings, the bank's revenue has grown by only about 1.20% per year on average, underperforming approximately 77.79% of global competitors. This information comes in light of HSBC's earnings report, which showed an annual growth rate of around 27.00% over the past three years.
The bank's five-year EBITDA growth rate stands at 8.50%, a figure that is relatively modest considering the bank's substantial global footprint. HSBC operates across 64 countries, manages assets worth $3 trillion, serves 40 million customers worldwide, and employs around 220,000 full-time staff.
Concerns have also been raised about the sustainability of the bank's dividends. HSBC announced a dividend of $0.5 per share on Tuesday, payable on December 21, 2023, with an ex-dividend date of November 8, 2023. The bank has maintained a consistent quarterly dividend payout since 2021 with a current 12-month trailing dividend yield of 5.68% and a forward dividend yield projected at 6.98%. However, the annual dividend growth rate has decreased by -16.80% over the past three years.
HSBC's payout ratio as of September 30, 2023, stands at 0.31, indicating that a significant part of earnings are retained for future growth and unexpected downturns. Its profitability rank is noted as being fair at 5 out of 10 with a track record of positive net income over the past decade. The five-year yield on cost of HSBC stock is approximately 5.68%.
While these figures may raise questions about HSBC's future growth prospects, it is important to remember that the bank is one of the world's largest and most established financial institutions. It provides a range of services including retail, commercial, and institutional banking in key markets such as the United Kingdom and Hong Kong.
InvestingPro Insights
HSBC's performance in the market, as per InvestingPro data, shows a promising trajectory. The bank's market cap stands at a robust 143.91B USD, and its P/E ratio is at a low 5.34, indicating a relatively undervalued stock. This aligns with one of the InvestingPro tips that highlights HSBC's low earnings multiple. The bank's revenue growth has been accelerating, with a remarkable 47.98% growth in the last twelve months as of Q3 2023, affirming the bank's potential for future growth.
InvestingPro tips also point out that HSBC has been consistently increasing its earnings per share and has raised its dividend for three consecutive years, which can be an attractive point for potential investors. The dividend yield as of the end of 2023 stands at a significant 9.54%, further supporting the bank's appeal to shareholders.
While the bank does face challenges, such as weak gross profit margins, it is a prominent player in the banking industry. Investors can glean additional insights and tips on HSBC and other companies from InvestingPro, which hosts a wealth of such valuable information.
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