Tuesday tips round-up: HSBC, Intertek

Holding shares for dividends alone may sound nice in theory but in practice is by no means a risk-free endeavour. Exhibit number one: HSBC. Year-to-date its stock price has fallen by 12%, wiping out more than twice the equivalent value of the dividends which it has paid out during the same period. True, the lender's solid capital position means that its pay-out should be safe enough. In fact, Neil Woodford, a well-known fund manager in the UK, included the stock within the sixty top holdings of his new income fund. As well, the bank is investing for growth in segments of the market in which it has a strong presence. Furthermore, higher global interest rates could see pre-tax profits grow nicely. Four consecutive quarterly 25 basis point increases in rates would add almost $1bn of annual net interest income, raising pre-tax profits by 5%. Even so, that share price drop shows how dangerous it is to assume that any bank has yet reached a steady state, writes the Financial Times' Lex column. Product testing, inspection and certification group Intertek may have hit bottom. That at least is what its supporters would have you think. In particular, adverse foreign exchange effects have been an important factor for the firm, given that it operates in 80 different currencies. On a more positive note, the firm has been exiting from some lower margin industrial businesses; hence the improvement seen in its margins at the interim stage. Intertek will also continue spending on the purchase of rivals at about a £100m clip this year. Small bolt-on acquisitions have been one of the keys to the outfit's steady growth over the years. The end of the downturn in mining - one of its main markets - on the other hand is hard to time. Indonesia, for one, recently banned nickel exports for political reasons. In any case, the stock has been hit by a spate of factors beyond its own control and at 19 times earnings continues to change hands at a high multiple given the sluggish growth prospects, says The Times's Tempus. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB