We recently compiled a list of the 10 Best European Dividend Stocks To Buy. In this article, we are going to take a look at where HSBC Holdings plc (NYSE:HSBC) stands against the other European dividend stocks.

Dividend payouts for MSCI Europe companies hit a record €407 billion in 2023, and they are set to grow even more in 2024, with an expected increase to €433 billion, up about 6.5%. According to Allianz Global Investors, the total dividend payout is expected to reach €460 billion by 2025, marking a 13% rise from 2023. The dividend yield is also climbing. It stood at 3.47% at the end of 2023 and could go up to 3.67% in 2024. This is still well above the yield on long-term German government bonds, even after bond yields shot up in 2022. German companies in the MSCI index paid out a 3.3% dividend in 2023, with a projected rise to 3.53% in 2024. Meanwhile, companies from Norway, though still at the top, are expected to see a slight decline in their yield, from 7.2% in 2023 to 6.4% in 2024.

Dividends have had a huge impact on overall equity performance in Europe. Over the last 40 years, about 36% of MSCI Europe’s total return has come from dividends. From 2019 to 2023, dividends made up almost half of the overall return, and from 2014 to 2018, they were responsible for most of it. On top of that, dividend-paying companies tend to have less volatile stock prices compared to those that don’t pay dividends.

Also Read: 10 Dividend Stocks For Steady Income and 10 Best Bank Stocks With High Dividends.

Global dividends hit a record $1.66 trillion in 2023, and they’re expected to reach $1.72 trillion in 2024, according to Janus Henderson. Dividend growth in 2023 was up 5%, with a 7.2% rise in Q4 alone. Banks were a major driver of this growth, delivering record payouts and benefiting from higher interest rates that boosted their margins. Although miners slowed down the overall growth, other industries like vehicles, utilities, software, food, and engineering showed strong performance, highlighting the value of having a diversified portfolio. Twenty-two countries saw record dividend payouts, with Europe (excluding the UK) and Japan playing a key role. The UK saw a 5.4% rise in dividends, and France, Germany, and Italy also set new records.

S&P Global Market Intelligence forecasted that Europe’s dividend payouts would hit €474 billion in 2024, which is a slight dip of 0.8% compared to last year. However, excluding special payments, ordinary dividends should rise by 4%, reaching a new high of €463 billion. Banks are leading the charge, making up 15% of the total dividend payouts, followed by capital goods and energy, both at 9%. The materials sector is set to see a 16% decrease in dividends, but it will still contribute about 6%, the same as utilities and food, beverage, and tobacco. The banking, capital goods, and pharmaceutical sectors are likely to see double-digit increases in their dividends, with banking staying strong at the top. On the flip side, the transportation sector might experience a steep 49% drop. That said, factors like geopolitical tensions and stubborn inflation might pose some risks for dividends in 2025.

Our Methodology 

For this article, we used the Finviz stock screener to filter out European dividend stocks. We focused on picking stocks with a consistent record of paying dividends, offering dividend growth, and being financially stable to steer clear of yield traps. The list below is ranked in the ascending order of dividend yield as of December 20. We have also mentioned the number of hedge fund holders in each firm, which was sourced from Insider Monkey’s Q3 2024 database.

At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)

HSBC Holdings plc (NYSE:HSBC)

Dividend Yield as of December 20: 4.14%

Number of Hedge Fund Holders: 14

HSBC Holdings plc (NYSE:HSBC), established in 1865 and based in London, is a global leader in financial services, operating through three key divisions – Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets. It is one of the best European stocks to invest in.

HSBC Holdings plc (NYSE:HSBC) derives about half of its revenue from Asia, reflecting its strong focus on the region, with the rest coming from global operations like commercial banking and wealth management. In Q3 2024, the bank reported $17 billion in revenue, a $1.1 billion year-over-year increase, and announced $4.8 billion in shareholder returns, including a $0.10 per share dividend and a $3 billion share buyback. With a low PE ratio, HSBC appears undervalued and poised for growth. To enhance efficiency and address market challenges, HSBC plans $300 million in cost savings through senior-level job cuts, a restructuring of its banking operations, and the creation of a dedicated wealth division. Starting in 2025, the bank will split into East and West divisions, with Hong Kong and the UK functioning independently.

HSBC Holdings plc (NYSE:HSBC)’s UK operations had an exceptional year in 2024, achieving their best financial performance since the separation of retail and investment banking in 2018, with net profits surging over 80% year-on-year. The acquisition of Silicon Valley Bank’s UK division, now rebranded as HSBC Innovation Banking, has significantly boosted the bank’s net interest margin and fee income, contributing to its strong results.

Insider Monkey’s third quarter database indicates that HSBC Holdings plc (NYSE:HSBC) was found in 14 hedge fund portfolios, the same as the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder in HSBC, with 687,682 shares worth $31 million.

Overall HSBC ranks 5th on our list of the best European dividend stocks to buy. While we acknowledge the potential of HSBC as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HSBC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.