How to build a dividend paying portfolio

Invest in products with dividends to earn income and capital gains in a volatile market

You can take market turbulence in your stride by building a dividend portfolio that will grow with you. The market offers a wide variety of dividend paying investment vehicles that allow investors to earn income and capital gains. You can select from a range of options and embark on your investment journey with ease and security.

Advantages of a diversified portfolio

An investment should keep a long-term perspective and look into the future. You may accumulate a large amount of capital by investing in dividend paying products to meet your future needs and move towards your financial goals. By utilising your assets promptly according to your investment objectives and acceptable risk level, you can overcome external factors such as epidemics and economic instabilities.

Compound interest is like a financial "snowball"

You can combine higher returns with a long-term investment horizon by generating higher interest rates.

For example:

Principal of HKD10,000 at 5% per annum, and renewed at the same interest rate upon maturity. Sum of principal and interest:

  1. After 1 year

    HKD10,000 x (1+5%) = HKD10,500

  2. After 2 years

    HKD10,500 x (1+5%) = HKD11,025


After 3 years
HKD11,0250 x (1+5%) = HKD11,576.3

A dynamic dividend investment portfolio can adjust risk and move toward financial goals

Feeling overwhelmed by the variety of investment options? Let us introduce you to investment products with interest-earning features, such as funds, currency linked investment , equity linked investments (“ELI”), bonds and certificates of deposit.

Income funds

Flexible redemptions, fund selection across different investment markets [1]

Faced with market instability and a lack of time to monitor market conditions? You may invest in “income funds", which usually seek recurring income as their primary investment objective. The fund manager will allocate a proportion of your assets to dividend-paying stocks, bonds, other fixed-income securities, and currencies for a more stable potential dividend income. Compared to growth funds, which aim for rapid capital appreciation, the risk is relatively low. With the flexibility of a trading platform, you can decide your investment horizon and flexibly fit your financial plan.

Currency Linked Investment

Earn interest while fulfilling your foreign currency needs

If you have a practical need for foreign currency such as travel and overseas study, there are certain foreign currency linked investments available in the market that are an alternative way to buy and sell foreign currency. You can invest in 10 different currencies, with investment periods as short as 7 days, and 88 ways to do so! You may boost your returns based on your view of future exchange rate movements. You could still receive interest even if you have made the wrong decision and convert your capital to foreign currency at the established exchange rate.

For details on how foreign currency linked investment works, please visit forex investment 101.

Currency linked with capital protected investment is also a way to earn potentially higher returns and keeps 100% of your capital protected, regardless of how your chosen foreign currency performs. Flexible investment deposit periods as short as 2 months provide an alternative capital preservation option for foreign currency holders.

Equity Linked Investments ("ELI")

Investment period as short as 2 months across U.S. / Hong Kong stock markets

You might not have any ideas on equity trading or the ever-changing market trend; or you may wonder if you have missed any investment opportunities while your favourite stock is trending upwards – you can choose an ELI to tap into the potential of equity market movements and earn a higher potential income. Its investment period as short as 2 months across U.S. / Hong Kong stock markets.

If the closing price is equal to or above the exercise price on the maturity date, you will receive the invested amount and interest according to the different types of ELI return mechanisms. If the closing price is lower than the exercise price on the maturity date, you will receive either a physical or cash settlement with unrealized loss. 

There are 3 main categories for ELIs. Investing strategies can be customised based on your personal goals.

3 types of ELIs

Types of ELI

Introduction

Callable ELIs The ELI will be redeemed before maturity if the closing price of the underlying stock reaches or surpasses the redemption price during the callable period. You will receive the invested amount plus any interest accrued.
ELIs with Potential Upside Cash Distribution The potential return will be higher if the share price of the underlying stock rises above the predetermined cash payout ratio on the final pricing date.
ELIs with Potential Upside Cash Distribution and Partial Capital Protection at Maturity You are essentially doing the same thing as Type 2 ELI (ELI with Potential Upside Cash Distribution), which offers a higher potential return coupled with capital protection up to 99.9%.

For details on how ELI works, please visit ELI 101.

Bonds and Certificates of Deposit

Predictable returns, multiple options

Looking for an easy way to start your investment journey? You can invest in bonds or certificates of deposit. Bondholders are effectively lending money to the bond issuer in return for the bond issuer’s promise to pay interest regularly over the life of the bond and repayment of principal at maturity[2]. Compared to other investment products, the price fluctuations and the frequency of dividend payments are more stable. Issuers pay dividends on a quarterly, semi-annual, or annual basis and bonds can be traded on the over-the-counter market before maturity. The difference between them: a bond is a debt instrument issued by a government, corporation, or another issuer to bondholders, whereas a certificate of deposit is issued by a financial institution, such as a bank.

Discover more about bonds: Fixed Rate Bond (Fixed coupon rate, steady interest income)

Bonds come in a wide variety of types. Types of bonds for investment include government bonds, local quasi-government bonds, supranational bonds, and corporate bonds.

For details on how bond investment, please visit bond investment 101.

Explore our products

Investment Funds

  • Online subscription as low as HKD5,000
  • Capture global investment opportunities
  • Diversified risk by including various underlying assets in one fund
Investment involves risk.

MaxiInterest Investment Deposit

  • Enjoy potential interest return
  • May exchange up to 10 different linked currencies at pre-defined exchange rate upon maturity
  • Invest online with just HKD5,000
This is a structured product involving derivatives. The maximum potential gain is limited to the pre-agreed interest rate. Investment involves risks. Price of FX exchange may go up or down. You should read and understand all the relevant product documents/service terms and conditions and risk disclosure statements before making any investment decision.

Equity Linked Investments ("ELI")

  • Potential return based on performance of linked stocks
  • Flexible tenor from 1 month to 3 year
  • Customised strike price
Investment involves risk.

Bonds and Certificates of Deposit

  • Steady income stream
  • Predictable return with relatively lower volatility
  • Diversify risk and offer relative stability to a portfolio
  • A wide selection of bonds and Certificates of Deposit with different investment tenors
Investment involves risk.

Related articles

Forex investment guide

How to earn additional interest by trading foreign currencies

Beginner's guide to bond investment

Winning through stability – Bond investment and volatile markets

Equity Linked Investments (ELI) 101

Equity Linked Investments keep you agile with offensive and defensive strategies.

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Footnote

Other point(s) to note

Risk Disclosure of Equity Linked Structured Products

•    Equity Linked Structured Products involve derivatives. The investment decision is yours but you should not invest in an Equity Linked Structured Product unless the intermediary who sells it to you has explained to you that the Equity Linked Structured Product is suitable for you having regard to your financial situation, investment experience and investment objectives. Equity Linked Structured Product is a Complex Product and you should exercise caution in relation to this product. The market value of the Equity Linked Structured Products may fluctuate and investors may sustain a total loss of their investment. Prospective investors should therefore ensure that they understand the nature of the Equity Linked Structured Products and carefully study the risk factors set out in the offering documents for the Equity Linked Structured Products and, where necessary, seek independent professional advice, before they decide whether to invest in equity linked investments. If you purchase the Equity Linked Structured Products, you are relying upon the creditworthiness of the Issuer of Equity Linked Structured Products.
•    Liquidity risk – Equity Linked Structured Products are designed to be held to its maturity. You may not be able to sell your investment in the Equity Linked Structured Products before maturity. If you try to sell the Equity Linked Structured Products before expiry, the amount you receive may be substantially less than the investment amount you paid for the Equity Linked Structured Products.
•    Credit risk of the Equity Linked Structured Products issuer – Equity Linked Structured Products constitute general unsecured and unsubordinated contractual obligations of the issuer. When you buy Equity Linked Structured Products, you will be relying on the creditworthiness of the Equity Linked Structured Products issuer and of no other person. You have no rights under the terms and conditions of Equity Linked Structured Products against any issuer of any linked stock. If the relevant Equity Linked Structured Products issuer becomes insolvent or default on its obligations under the Equity Linked Structured Products, in the worst case scenario, you could lose all of your investment.
•    Not the same as investing in linked stock - Investing in Equity Linked Structured Products is not the same as investing in the linked stock(s). Changes in the market price or level of any linked stock(s) may not lead to a corresponding change in the market value of, or your potential gain or loss under, the Equity Linked Structured Products.
•    Before making any investment, investors should i) read and fully understand all the offering documents relating to such securities or investments and all the risk disclosure statements and risk warnings therein; and ii) make investment decisions in light of your own investment objectives, financial position and particular needs and where necessary consult your own professional advisers before investing.
•    Below are some key risks in trading equity linked structured products linked to US underlyings. This list is non exhaustive and are provided here for your reference only. You should read and understand the risk factors together with the terms and conditions as set out in the relevant offering documents of the equity linked structured products for details.
•    Risks relating to difference in trading days and hours – Trading in each linked stock on the relevant US exchange will be executed during the trading hours of the relevant US exchange, which is located in New York and opens after normal business hours in Hong Kong. You should be aware of the trading hour and time zone difference between Hong Kong and New York in assessing the trading price of the linked stock.
•    Certain information about the linked stock may only be available in English in real time. If you are not proficient in English, you should consider whether the investment in this product is suitable to you, and obtain independent advice where necessary.
•    Reliance on mobile application in providing information about the linked stock and our external service provider in providing such information – news feeds regarding updated information of the linked stock in English and Chinese are available via the Hang Seng Invest Express mobile application. Such news feeds are provided by the Bank’s external data provider and their availability may be interrupted or suspended due to either the Bank or external data provider’s technical and systematic failures, in which case the availability of such news feeds may be delayed or suspended and you may not be able to have access to such news feeds.
•    United States taxation risk – You should note that United States taxation rules are complex and their application may depend on your particular circumstances, including whether you enter into other transactions with respect to the underlying US stock. In addition, if the U.S. Internal Revenue Service successfully argue that this product is treated as “dividend equivalents”, a withholding tax at a rate of up to 30% is imposed on such payments made to a non-U.S. investor will adversely affect the potential return under the investments. You should, prior to your investment in this product, consult your own tax advisor regarding the application of related legislation arising from your investment.
•    ELIs are defined as complex products under the Guideline on Online Distribution and Advisory Platforms from the Securities and Futures Commission (“SFC”), investor should exercise caution in relation to this product.

 

Risk Disclosure of Investment Funds

•    Investors should note that all investments involve risks (including the possibility of loss of the capital invested), prices or value of investment fund units may go up as well as down and past performance information presented is not indicative of future performance. Investors should read carefully and understand the relevant offering documents of the investment funds (including the fund details and full text of the risk factors stated therein) and the Notice to Customers for Fund Investing before making any investment decision. Investment funds are investment products and some may involve derivatives. Investors should carefully consider their own circumstances whether an investment is suitable for them in view of their own investment objectives, investment experience, preferred investment tenor, financial situation, risk tolerance abilities, tax implications and other needs, etc., and should understand the nature, terms and risks of the investment products. Investors should obtain independent professional advice if they have concerns about their investment.

 

Important Risk Warning of Bond and 3rd party Certificate of Deposit Product

•    Bonds and Certificates of Deposit (CDs) are investment products. The investment decision is yours but you should not invest in a bond/CD unless the intermediary who sells it to you has explained to you that the bond/CD is suitable to you having regard to your investment objectives, investment experience, investment tenor, financial situation, risk tolerance abilities, tax implications and other needs, etc., and you should read the relevant product offering documents and terms and conditions (including the full text of the risk factors therein) in detail before making any investment decisions. Your intermediary is under a duty to assure that you understand the nature and risks of this product, and that you have sufficient net worth to be able to assume the risks and bear the potential losses of trading in this product.
•    Bonds are not deposits and should not be treated as substitute for conventional time deposits.
•    Certificate of Deposit is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
•    Investors who purchase bonds/CDs are exposed to the credit risk of the issuer and guarantor (if any) of the bonds/CDs. There is no assurance of protection against a default by the issuer/guarantor in respect of the repayment obligations. In the worst case scenario, any failure by the issuer and the guarantor (if any) to perform their respective obligations under the bonds/CDs when due may result in a total loss of all of your investment.

 

Risk Disclosure of MaxiInterest Investment Deposit

•    This is a structured product involving derivatives. The investment decision is yours but you should not invest in the MaxiInterest Investment Deposit unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives. Investors should read the relevant Important Facts Statement, Terms and Conditions and risk disclosure statement before making any investment decision.
•    Investors should note that this product is not capital protected and is not a normal time deposit, and thus should not be considered as normal time deposit or its alternative.
•    Earnings on this product are limited to the nominal interest payable. As the principal and the earning will be paid in the Deposit Currency or the Linked Currency, whichever has depreciated against the other, investors will have to bear the potential losses due to currency depreciation, which may be substantial. If the product is withdrawn before maturity, investors will also have to bear the costs involved. Such losses and costs may reduce the earnings and the principal amount of this product. Investors should seek professional advice where necessary. The relevant Terms and Conditions of this product are available upon request to the staff of the Bank.
•    This product is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
•    Investment in this product is subject to the credit risk of the Bank.
•    Renminbi (RMB) is subject to foreign exchange control by the PRC government and thus investors investing in the MaxiInterest Investment Deposit involving RMB are subject to the currency risk of RMB.

 

Risk Disclosure of Capital Protected Investment Deposit

•    This is a structured product involving derivatives. The investment decision is yours but you should not invest in the Capital Protected Investment Deposit unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives. Investor should read the Important Facts Statement of the relevant investment type, the relevant term sheet, Terms and Conditions and risk disclosure statement before making any investment decision.
•    Investor should note that this product is not normal time deposit and thus should not be considered as normal time deposit or its alternative.
•    This product is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
•    Investment in this product is subject to the credit risk of the Bank.
•    Renminbi (RMB) is subject to foreign exchange control by the PRC government and thus investors investing in the Currency–Linked Capital Protected Investment Deposit involving RMB are subject to the currency risk of RMB.

Remark(s)

  1. Dividend payments may not be guaranteed
  2. In the absence of a breach of contract.