To The Moon

Dividend Resilience, Not Hype

I’ve long liked $HSBC Holdings PLC(HSBC)$ as a passive income anchor because the claim isn’t marketing fluff—it’s built on history. The bank has paid dividends for decades, with only rare interruptions during true systemic shocks, the most recent being the brief 2020 pandemic pause. Since then, payouts have resumed alongside a $3 billion buyback. Today’s forward yield of 3.25 percent looks modest compared to its five-year average of around 6 percent. This isn’t a sudden stinginess; it’s because the share price has rallied sharply from post-pandemic lows, while payouts haven’t fully returned to historic levels. Unless earnings lift or dividends are raised further, this lower yield could persist for now—but the track record and buybacks keep the income stream appealing.

For clarity, I’m using figures for HSBC’s NYSE-listed ADR (HSBC), which reflects the US-dollar share price.

HSBC’s umbrella still opens when the markets drizzle

Valuation and Buyback Discipline

The market’s nerves after the half-year results have created a valuation window. With a forward P/E below 10 and a price-to-book of roughly 1.1, HSBC trades at a modest premium to tangible equity. Management’s decision to buy back $3 billion of shares while maintaining its dividend signals confidence in earnings durability and balance-sheet strength. Retiring shares at these levels structurally boosts per-share cash flow, giving income investors a quiet compounding effect even if aggregate earnings recover only gradually.

Competitive Landscape: Strength with Friction

HSBC’s global footprint used to be labelled unwieldy; I now see it as a defensive moat with some thin spots. Its scale in Asia—especially in trade finance, cross-border corporate banking, and wealth management—gives it reach that regional peers can’t copy overnight. Yet pressure is mounting. $DBS(D05.SI)$ in Singapore is luring high-net-worth clients through slick digital platforms and bundled advisory, while $JPMorgan Chase(JPM)$ is using its global heft to muscle into Asian private banking. HSBC’s integrated model—corporate lending feeding trade finance and wealth services—is still a strength, but agility is the trade-off. I’m watching client acquisition costs and share-of-wallet metrics to ensure the moat isn’t quietly eroding.

HSBC ADR outpaced major US peers over the past year, buoyed by buybacks and dividend strength (Price with Dividend, USD)

China Exposure: Pain Today, Potential Tomorrow

China remains the main swing factor. HSBC’s first-half profit fell 26–29 percent after multi-billion-dollar impairments tied to its Bank of Communications stake and rising provisions against Hong Kong commercial real estate loans. If the property crisis worsens—with a fresh wave of defaults or steeper price declines—HSBC faces higher credit charges, near-term margin pressure, and possible scrutiny on dividend sustainability.

Here’s the flip side: these provisions act as cushions. If the property market stabilises, some of today’s losses could reverse into future profit. In simpler terms, HSBC is booking pain now to protect against bigger shocks later—and that prudence could transform into an earnings tailwind once conditions normalise. I call this a 'rain-now, shine-later' dynamic rather than the jargon-laden 'asymmetric optionality.'

Financial Reality Check

HSBC ADR’s 2025 rally shows bouts of volatility, but core trend remains intact (Bollinger Bands with Volume)

Stripping out the headline drama, the underlying financials are more ordinary than alarming. Net margins are in the mid-teens, in line with global banking norms, and the balance sheet carries more than a trillion dollars in cash and liquid assets versus $746 billion in debt. That 'cash' largely represents deposit funding, so it’s not idle cash for shareholders, but it does underline liquidity strength.

Profitability softened in H1 2025, but core businesses—wealth and corporate banking—remained resilient. Over the 12 months to July 2025, the shares delivered a total return of about 36 percent, even after the recent pullback. This shows the market has already absorbed cycles of optimism and caution; the drop is a reminder of volatility, not a collapse of confidence.

Verdict: Income Through Imperfect Weather

$HSBC Holdings PLC(HSBC)$ isn’t flawless, but it’s a disciplined global bank that continues to pay investors to wait. China’s property sector remains a real risk, and regional competition is no sideshow, yet the combination of a steady dividend, active buybacks, and a patient balance-sheet strategy makes it an attractive income hold for me.

Steady dividends keep balance through Asia’s shifting skies

I’m keeping my umbrella up, cashing the dividend cheques, and watching Asia’s storm clouds carefully. In a portfolio built for passive income, HSBC remains a credible companion—not because the weather is perfect, but because the bank knows how to walk through the drizzle without getting soaked.

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