Why is everyone buying HSBC shares?

A popular UK investment platform updates the most-bought stocks each week. One that rose from last week was HSBC (LSE:HSBA). The bank’s shares are up 34% in the past year, but have fallen 9% in the past month.

Could this be a dip that investors are now seeing as a great buying opportunity?

An appealing cash cow

I think one reason why the stock’s popular right now is that investors are increasingly recognising just how much cash the bank can generate and return to shareholders.

HSBC returned a whopping £13.99bn to investors in 2025. This consisted of £9.55bn of dividends and £4.44bn of share buybacks. Management continues to target a dividend payout ratio of 50% of earnings, excluding certain notable items, through to 2028.

That’s the sort of policy that naturally attracts income investors. With a current dividend yield of 3.91%, it’s easily above the FTSE 100 average. And with many in the UK looking for ways to make idle cash work harder, I can see the appeal in buying the stock for cash payments.

Interest rate expectations

However, this isn’t purely a dividend story. HSBC’s underlying performance remains strong. During the first half of 2026, the bank generated £29.3bn of revenue and £15.11bn of profit before tax, excluding notable items.

In theory, this performance should improve because of the interest rate environment. Over the past couple of months, investors are becoming increasingly aware that central bank committees in the UK as well as further abroad will need to raise interest rates to deal with the energy crisis.

HSBC has an enormous deposit franchise, with around £1.3trn of deposits at the end of 2025 that could benefit from higher rates. That’s another reason why I believe the stock’s popular right now.

Direction from here

Looking forward, I think there’s plenty to like, which means HSBC shares could remain supported. Management’s targeting a return on tangible equity of at least 17% in 2026, 2027 and 2028. It’s also aiming for annual revenue growth to accelerate to 5% by 2028.

If future trading updates show these targets are being hit, then the combination of earnings, dividends and buybacks helps explain why the shares could remain popular.

Of course, I wouldn’t ignore the risks. HSBC has significant exposure to Hong Kong and mainland China. A prolonged Chinese economic slowdown, weakness in the property market or rising loan defaults could hurt earnings. Falling interest rates could also eventually squeeze banking margins.

Noting the positive retail buying of HSBC shares is a good sign in my book that the short-term dip might be coming to an end. Based on the interest-rate outlook and the stock’s income appeal, it’s firmly on my radar to buy when I have free cash. I believe it’s a stock for investors to consider.

Should you invest £5,000 in HSBC Holdings right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if HSBC Holdings made the list?

Jon Smith has no positions in the shares mentioned.