5

Currently, I would like to invest in HSBC stock.

http://www.google.com/finance?q=NYSE:HBC&fstype=ii

I saw that in 2008, it earned USD0.98 per share, and paid out USD0.64 dividend per share.

My question: is this earning and dividend implied for both shares in New York (~USD50.00) and Hong Kong (~HK77.95) ?

According to currency conversion rate, isn't USD50 = HK388?

1 Answer 1

5

First and foremost you need to be aware of what you are comparing.

In this case, HSBC as traded on the NYSE exchange is not common shares, but an ADR (American Depository Receipt) with a 5:1 ratio from the actual shares.

So for most intents and purposes owning one ADR is like owning five common shares.

But for special events like dividends, there may be other considerations, such as the depository bank (the institution that created the ADR) may take a percentage.

Further, given that some people, accounts or institutions may be required to invest in a given country or not, there may be some permanent price dislocation between the shares and the ADR, which can further lead to discrepancies which are then highlighted by the seeming difference in dividends.

1
  • So, should I interpret as this way? I invest USD50.00, and my total earning is USD0.98 x 5 = USD4.90 ? Also, my received dividend will be USD0.64 x 5 = USD3.20 ? Commented Sep 3, 2010 at 5:42

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .