Post for: #Industrial and Commercial Bank of China ^{(6 Posts)}

On May 10, 2024, the H-shares of the China Banks rose substantially. The four largest state-owned banks in China ended the day with the following closing prices: News reports that the China authorities are considering the the City's proposals to…

Four of China's largest state-owned banks: Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC) and Agricultural Bank of China (ABC), have recently announced plans to pay interim dividends (half-yearly) beginning in 2024. This…

The Industrial and Commercial Bank of China (ICBC) is one of the mainland China Bank stocks which I keep in my Dividend Income Portfolio. An earlier article on ICBC provided an estimate of the Intrinsic Value, Margin of Safety and…

I have previously published estimates of the intrinsic values of the H-shares of Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and China Citic Bank. In their latest quarterly financial reports, all…

Introduction

In a previous article, I laid out the reasons why I added the H-share of the Industrial and Commercial Bank of China (ICBC) to my dividend income portfolio. In the same article I also described the discounted cash flow analysis which I used to estimate the intrinsic value of ICBC H-share, which worked out to be 5.83HK$ per share.

Not long after the article was posted on my blog, I came across a piece of news article on AAStocks.com which provided a summary of the latest Brokers' Recommendations and Target Prices for ICBC H-share (1398.HK).

Summary

In this article, I examine the stock valuation of the H-share of the Industrial and Commercial Bank of China (ICBC 1398.HK) through the eyes of a Dividend Investor. Dividend Cash Flow analysis was used to evaluate ICBC's H-share (1398.HK). The Dividend Discount Model was employed to calculate the H-share Intrinsic Value, Expected Return on Investment, and its Margin of Safety.
Continue reading to learn more.

Introduction

In a previous article, I looked at certain China H-shares as good investment candidates for dividend income. Since then, I have invested in some of the same companies discussed in that article, including the H-share of the Industrial and Commercial Bank of China (ICBC). Here, I would like to discuss the rationale behind the investment decision to purchase the H-shares of ICBC for my dividend income portfolio.

Over the years, my approach to investing has evolved from the speculative growth and momentum style to a more conservative method, preferring stocks that provide attractive dividend income streams at inexpensive valuations. I used the following set of questions to help me determine the investment worthiness of the H-share of ICBC:

• • Does ICBC have a good long-term dividend track record?

• • Does ICBC currently offer an attractive dividend yield (above the average yield of Hang Seng Index constituents)?

• • Is the current payout ratio of ICBC sustainable?

• • What is the expected return on investment of ICBC over a 10-year period? The majority of recommendations by financial analysts tend to have a 12-month time horizon. I find the 10-year period to be more suitable for a dividend income stock, especially one which is part of a retirement dividend income portfolio.

• • Does the H-share of ICBC offer a sufficient margin of safety to the intrinsic value of the stock?

• • Are the H-shares of ICBC considered inexpensive when measured according to traditional value investing yardsticks? A good dividend stock with an inexpensive valuation will minimize the risk of capital impairment and increase the probability of capital gains.

With the above questions in mind, let us delve into the analysis of ICBC H-share to find the answers.