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FTSE 100 stocks are a popular asset class for people looking for a large and growing passive income. Even in difficult and uncertain economic times, UK blue-chip shares have proven they have the courage to grow dividends.
It's a record that Computershare analysts believe will continue.
On the one hand, they think that the “slow global and UK economy“Will limit dividend growth for UK shares in 2024. However, they still expect payout growth to hold”healthy“, and have predicted that “most sectors will show steady, low single-digit growth.”
Special dividends are expected to continue coming thick and fast. That's why Computershare believes total payments will reach £94.5bn in 2024, a 4.3% year-on-year increase.
A high-income stock?
This means the average forward dividend yield for UK stocks sits at a solid 4%.
But I think I can do better with careful research. banking giant HSBC Holdings (LSE:HSBA) is a FTSE 100 stock that I think could pay huge dividends this year and beyond.
The company faces near-term uncertainty as China's economy struggles. Like other regional lenders, it is particularly vulnerable to continued weakness in the country's real estate sector.
But the problems in Asia are not expected to affect HSBC's ability to continue paying market-beating dividends. This is largely due to the company's strong financial foundations.
Solid balance
As of March, its CET1 capital ratio was 15.2%. This represented an increase of 0.4% from the same point in 2023 and gives the bank one of the strongest balance sheets in the industry.
HSBC's immense financial clout meant it paid its biggest dividend last year since the financial crisis of 2008. It also means the company continues to make huge share buybacks.
The bank bought back $2 billion of its shares in the first quarter. And in April it announced plans to acquire another $3 billion.
bright perspective
City analysts believe the total dividend will rise to 83 cents per share in 2024, from 61 cents last year. This includes a special payout following the recent sale of its Canadian operations, and means HSBC's share performance sits at an impressive 9.4%.
That is more than double the current average of 4% for UK shares.
But as a long-term investor, I'm not just interested in companies that will pay large ordinary dividends over the next two years.
I'm looking for those that have a good chance of generating a growing, above-market payout over a long period of time. As the Asian banking industry grows, I believe HSBC will have the tools to do just that.
A brilliant bargain
Statista researchers believe that net interest income in the region's banking sector will soar at a compound annual growth rate of 6.46% between now and 2028, to a whopping $9.12 trillion.
I don't think this huge opportunity is reflected in HSBC's low share price. Today they trade with a forward price-to-earnings (P/E) ratio of just 6.8 times.
Also given the bank's bright dividend prospects, I think this FTSE 100 stock is one of the most attractive income stocks out there.