HSBC Holdings plc (LON:HSBA) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HSBC Holdings plc (LON:HSBA) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase HSBC Holdings' shares on or after the 6th of March, you won't be eligible to receive the dividend, when it is paid on the 25th of April.

The company's next dividend payment will be US$0.36 per share. Last year, in total, the company distributed US$0.66 to shareholders. Based on the last year's worth of payments, HSBC Holdings has a trailing yield of 5.6% on the current stock price of UK£9.336. If you buy this business for its dividend, you should have an idea of whether HSBC Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for HSBC Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. HSBC Holdings is paying out an acceptable 53% of its profit, a common payout level among most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see HSBC Holdings's earnings have been skyrocketing, up 34% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, nine years ago, HSBC Holdings has lifted its dividend by approximately 2.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because HSBC Holdings is keeping back more of its profits to grow the business.

Final Takeaway

Should investors buy HSBC Holdings for the upcoming dividend? Earnings per share are growing nicely, and HSBC Holdings is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, HSBC Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in HSBC Holdings for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for HSBC Holdings you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.