Excitement. We all want excitement, thrills and spills, and adventure. But, believe me, you can have too much excitement. Sometimes, I just yearn to be boring.
There is a lot to be said to investing in boring shares too. HSBC (LSE: HSBA) (NYSE: HSBC.US) is one such ‘boring’ share. I actually mean this as praise: this bank is steady, consistent and churns out profits and a steadily increasing dividend year after year.
Profitable even in the depths of the Credit Crunch
It is one of the world’s largest banks, and its scale is staggering, with thousands of offices across Africa, Asia, Europe and North and South America. This scale and geographic spread means that it is a slow-moving organisation, but it also gives the company stability.
Although its share price fell along with other banks, it avoided much of the maelstrom of the Credit Crunch. I think it was a remarkable achievement that, even in the depths of the Great Recession, the business was still highly profitable, and was able to raise capital immediately and without difficulty. Very few banks could say that at the time.
But even HSBC has not been immune from trouble, being involved in the PPI mis-selling and money-laundering scandals.
And, post-Credit Crunch, HSBC has faced the same difficulties the other banks have faced. Globally, we live in a world of low interest rates. We live in a world where people check their bank statement through their computer and make payments through their smart phone. Cheques, notes and coins will soon be a thing of the past.
But retrenching, just like the other banks
So, just like other banks, HSBC has been retrenching. HSBC is withdrawing from 20 countries, and focusing its work on its main markets, such as the UK and Hong Kong, and fast-growing countries such as Mexico, Singapore, Turkey and Brazil.
By concentrating on these strengths, I expect HSBC to gradually grow earnings year by year. Yet, after recent falls, the share price now looks cheap: the 2014 P/E ratio is 11, falling to 9 in 2015. The dividend yield is 5%, and is set to steadily increase.
The trend of HSBC’s share price is still upwards, so the current dip is a buying opportunity. This is a company to invest in not to make a quick profit, but to hold over many years. Keep garnering and reinvesting those dividends, watch the share price steadily rise as the profits rise, and in a few years you will be sitting on a tidy profit.
In my view, the company is a buy, particularly suited to dividend investors.