In times where economic growth is expected to slow, it is natural for investors to look for income-producing investments. Many companies on the Hang Seng Index pay decent dividends, making them good choices for income investors.
Here are three of the companies known to have above average dividend yields.
#1: Sinopec (386.HK)
Petroleum and petrochemical giant China Petroleum & Chemical Corporation, or Sinopec (386.HK) has one of the highest dividend yields among blue chip stocks in Hong Kong. Based on Sinopec’s recent share price of HKD 4.55 at the time of writing, the dividend yield is about 9%.
In the past three years, Sinopec’s dividend per share has been 0.249 yuan in 2016, 0.50 yuan in 2017, and 0.42 yuan in 2018. The fluctuations in historical dividends suggest that a high dividend yield on its own may not provide a conclusive justification to invest in a stock. Investors should consider whether the high dividend yield can be sustained.
#2: Bank of China (3988.HK)
Bank of China (3988.HK), one of the largest state-owned banks, offers a dividend yield of 6.8% based on its share price of HKD 3.07 at the time of writing. The company paid a dividend per share of 0.168 yuan in 2016, growing to 0.184 yuan in 2018, representing a compounded annualised growth rate of over 4.6%.
In addition, the dividend payout ratio of the company is fairly conservative at 30%, which suggests that there is room for further growth in dividends.
#3: HSBC (5.HK)
Another bank stock on the list, HSBC (5.HK), founded in 1865, is one of the largest banks in the world. From 2016 to 2018, the bank has been paying a dividend of HKD 0.51 per share. Based on HSBC’s closing price of HKD 58.10, the dividend yield rate is nearly 6.9%, which is a respectable number indeed.
However, at a dividend payout ratio of over 80%, it looks somewhat less attractive compared to Bank of China. This means that HSBC’s dividend growth in the near future is likely minimal.