HSBC (LSE:HSBA) shares have enjoyed a splendid 2026 so far, gaining 15.4%. And over the past year, they have grown an even more pleasing 58.5%.
You’d therefore expect, after such a run for the banking giant’s share price, that the dividend yield for it would be quite low.
But you might be surprised to hear that the yield is still pretty high. In fact, the company’s 4.1% yield is still higher than the FTSE 100’s average yield of 3%.
Therefore, the company’s shares remain a great passive income choice to consider. So how many of its shares are needed to make an extra grand a month?
The passive income path
With a dividend yield of 4.1% and a current share price of 1,374.80p, an investor would need to buy 21,447 shares to aim for £1,000 a month as a second income.
But if all this money is invested in just one stock, investors won’t be able to benefit from diversification.
For example, there are signs that HSBC is facing a more challenging economic environment than before. This is evident after reading its first-quarter results for 2026, where expected credit losses (ECLs) are $1.3bn.
Compared to ECLs of $901m in the last quarter of 2025 and $876m in the first quarter of 2025, we can see that this is clearly increasing.
Having a diversified portfolio of stocks would therefore help to minimise the risk any HSBC issues could have on an investor’s portfolio.
Moreover, it would cost £294,853.36 to buy this number of shares. I appreciate that not many reading this will have that much spare change to hand.
However, while it may be difficult to achieve immediately, I’ll now illustrate how an investor could achieve this over time.
The effect of compounding
Let me start by outlining some assumptions for the basis of my illustration.
Firstly, I’ll assume that the company’s shares and dividends grow at a stable 3% a year. This will also keep the dividend yield stable.
Secondly, an investor puts down a more modest £20,000 initial investment and then invests an additional £250 a month into the bank’s shares.
With this in mind, in just over 24 years, the value of these shares will reach the threshold needed to make an extra £1,000 a month.
It’s important to understand that dividends aren’t guaranteed, but this is a great example of how investors could make an extra income over time.
Now what?
With a forward price-to-earnings ratio of 11.1, HSBC shares aren’t exactly expensive. That’s despite the 58.5% rise in the bank’s shares over the last year.
So, even though the share price has appreciated quite a bit, this is still a good valuation and entry point to consider buying some of its shares to generate passive income.
But it’s not the only dividend stock I think investors should consider to make an extra grand a month…
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?
Muhammad Cheema does not hold any positions in the companies mentioned.
