The U.S. Justice Department announced $5.06 billion settlement with Goldman Sachs, whose alleged illegal activities during the financial crisis have now avoided legal consequences. This is a good news – particularly so for international banking stocks such as HSBC Holdings (0005), and Standard Chartered (2888).
In other words, a penalty payment of five billion U.S. dollars can convince U.S. Justice Department to drop charges and thus win a settlement. The past one year has seen the plummet of HSBC Holdings and Standard Chartered, whose combined losses believed to be multiples of five billion dollars.
Standard Chartered is perhaps facing more complicated problems. The only trouble of HSBC Holdings is that it is always fined by U.S. government. The seemingly endless rounds of fines and penalties have frightened off the investors.
HSBC Holdings is, however, facing no problem in its business operations. And now, thanks to the settlement case of Goldman Sachs, the investors should perhaps worry less about HSBC Holdings being fined repeatedly.
HSBC Holdings to Offer Higher Dividend.
Earlier announcement of HSBC Holdings to offer higher dividend to its shareholders is evident that the company management is confident to have weathered the worst.
Since its announcement of 0.08 per share for dividend, I have been advising investors to invest into HSBC Holdings to earn higher dividend. Some investors, however, thought they could buy in at its lowest and sell at a higher price. From their perspective, 0.08 per share was a support level for HSBC Holdings to rebound higher. And they thus gave it a try.
Almost immediately after their investment, the stock price of HSBC Holdings registered a further dip. Its dividend – however – rallied up to 0.085 per share.
Articles appeared on media urged investors not to walk into the high-dividend trap. These naysayers perceived that the dividend rate lifted because of lower stock price. And they said the price level is never considered lowest as yet, and it might still dip further.
In Hong Kong, not many see eye to eye with me regarding the future of HSBC Holdings. It can perhaps be said that stock market analysts usually jump on the bandwagon to say something bad about an already-declining stock.
I should reiterate that investment in HSBC Holdings is definitely not speculating from its lowest. And it is inadvisable to invest it for short-term. The purpose of investing in HSBC Holdings is to earn dividend. If the dividend rises from 0.08 to 0.09 per share, we can buy in more stocks. Even if it goes further up to 0.10 per share, we can still top up – until its dividend rate declines significantly.
Meanwhile, Dr Chan will be sharing more insights about his macro outlook of the economy and what you can do during this time of uncertainty at our upcoming Shares Investment Conference 1H2016. Click here to find out more.