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Dividend stocks are not a way to get rich quickly. What they will do, however, is to provide you with excellent pbadive income. When they are planned properly, dividend stocks can also be essential cornerstones for anyone planning their retirement. Holding dividend stocks with exposure to China, as well as to Hong Kong, may be one of the least popular ways to geographically diversify a portfolio.
In addition to dividend flows, these stocks can also be a source of additional capital if the economy of China or Hong Kong grows faster than expected. In this article, I will badyze four dividend stocks whose return exceeds 4%, three of which have significant exposure to China.
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1. Holdings of energy badets
Energy Asset Fund (NASDAQOTH: HGKGF) is a Hong Kong-based utility and energy company controlled by tycoon Li Ka-shing. It invests primarily in transportation, power generation and distribution badets. Because of its investments abroad, in 2018, more than half of its profits came from the United Kingdom, 19% from Australia and 14% from Hong Kong. As a utility company, Power Asset's cash flows are more stable than many other companies due to the critical nature of electricity and natural gas.
As a company led by Li Ka-shing, which many call Warren Buffett (Asia), the company could potentially generate accretive M & As in the future. Although earnings fell by 8% in 2018, Power Assets announced earnings per share (EPS) of HK $ 3.58 for 2018, thus covering its dividend of HK $ 2.80 per share for the year. The shares currently offer a dividend yield of almost 5% and the Power Assets dividend has increased or remained constant every year since 2013.
2. HSBC Holdings
HSBC Holdings (NYSE: HSBC) is a diversified international bank. Investors like the bank because of its access to the fast-growing Asian markets and the strength of its balance sheet. More than 80% of the bank's adjusted pre-tax profit comes from Asia, which is expected to grow faster than that of the United States or Europe in the near future. In terms of balance sheet, management expects the company's common equity ratio to exceed 14% in 2019, which is solid.
This compares favorably with the four major US banks, of which only JPMorgan Chase has a Tier 1 ratio of over 14%. HSBC could also benefit from the latest news that the Chinese government will allow foreign companies to hold more of China's financial sector. In addition, the development of the Pearl River Delta in southern China offers HSBC the opportunity to use its strong base in Hong Kong to grow substantially in the world's second largest economy.
In terms of dividend, HSBC pays a dividend every three months (thus providing a better cash flow to investors) and its annual dividend is around 6%, calculated on the basis of the current price. Management believes the dividend is sustainable as it has announced its intention to maintain the annual dividend at "current levels for the foreseeable future".
3. Lenovo Group
Lenovo Group Ltd (NASDAQOTH: LNVGY) is the world's largest PC maker with a global market share of about 23.4%. The company also has growing Internet of Things (IoT) divisions and data centers. For fiscal year 2019, the business turnover of its IoT division grew by 9.9% over that of its data center group, from 37% to 6.02 billion USD.
As China deploys 5G wireless technology that transparently connects IoT devices, Lenovo's IoT growth could accelerate. As more and more Asian companies migrate to the cloud, Lenovo's server division will benefit. In terms of dividend, Lenovo maintains or increases its dividend annually since 2014 and its current annual dividend of HK $ 0.278 is approximately 4.6% based on its current price.
4. Sands China
Finally, we have Sands China Ltd (NASDAQOTH: SCHYY), one of the biggest casinos and resorts operators integrated in Macau, and the Chinese unit Las Vegas Sands Corporation (NYSE: LVS). The game is illegal in China, making it the Macau gambling enclave – where the game is legal – is a popular meeting place for entertainment and betting. The territory has seen a recovery in economic activity in recent times, with gaming revenue reaching its highest level in five months: Patacas 25.95 billion (US $ 3.21 billion) ) in May.
Unlike the other three stocks mentioned, the Sands China dividend has been less stable. Its dividend has risen from $ 1.99 in 2014 to $ 1 in 2015 before rising to $ 1.99 per share in 2016. The company's dividend has remained stable since then and its return is close to 5.1% based on its current price.
Take away
Power Asset, HSBC Holdings, Lenovo Group and Sands China are all dividend stocks with returns above 4%. Each has its own strengths and all could benefit if the Chinese and Hong Kong economies improve. Most importantly, however, I think the four investors deserve a deeper investigation for dividend investors looking to diversify their holdings while generating a steady stream of income.
A version of the article originally appeared on our Fool Asia website. For more coverage like this, go to Fool.hk.fr
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