Nick Goodway: Don’t bank on this dividend joy lasting for long

It looks rather like jam today and margarine tomorrow from HSBC.

The $2.5 billion (£1.9 billion) share buyback has grabbed the headlines while the dropping of a progressive dividend policy in favour of a sustained one and no longer hitting a 10% return on equity by the end of 2017 seem to be in the clarifications column.

To be fair, Stuart Gulliver is correct in saying that it could not be assumed the dividend was going up every quarter “notwithstanding what is going on in the world”.

Given that the bank has at last returned to being a bell-wether of the global economy — with a heavy weighting to China and a post-Brexit UK — and its outlook is distinctly cautious, a maintained dividend is sensible.

At least with forecasts of a 2016 dividend of 51 cents paid out of earnings of 58 cents, the payout is covered — just. But that is well down on 2015’s dividend of 51 cents from earnings of 74 cents a share.

If there is one thing banks, in particular, should never do, it is to pay dividends out of their reserves. But as the Bank of England has given the nod to the unexpected share buyback, it has almost certainly approved HSBC’s medium-term plans for ordinary dividends.