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Tencent (OTC:TCEHY) is a Chinese technology behemoth. Its communications and social services connect more than 1 billion people. It also publishes some of the world's most popular video games. In addition, Tencent provides a range of services, including cloud computing, advertising, and financial technology. In many ways, Tencent is like many of the top U.S. technology companies all rolled into one.
A big part of Tencent is its uber-popular WeChat/Weixin super app. The platform enables users to send messages, share photos and videos, shop online, and make payments. Tencent had more than 1.3 billion monthly active users of WeChat/Weixin at the end of 2023.
Tencent's diversified portfolio of leading technology and e-commerce businesses has many people interested in learning about its stock. This guide will teach you everything you need to know about Tencent and how to invest in the Chinese tech stock.
Tencent listed its stock on the Hong Kong Stock Exchange in 2004. Although the company hasn't listed its stock on a major U.S. stock exchange like the NYSE or Nasdaq Stock Exchange, shares trade on the OTC Market Exchange under the stock ticker TCEHY, so you can buy shares through most online brokers and trading platforms.
Anyone interested in investing in the Chinese e-commerce stock will need to take a few steps before becoming a shareholder. This six-step guide will show you how to invest in stocks and add Tencent to your portfolio.
Once you complete the order page, click to submit your trade and become a Tencent shareholder.
Not every stock will be right for you. You need to make sure your portfolio matches your risk tolerance, return expectations, and values.
With that in mind, here are some reasons why you might want to invest in Tencent:
On the other hand, here's why Tencent might not be a good stock for you to buy:
Profits are the fuel of business. They enable companies to fund their operations and expansion. They're crucial for investors. Companies delivering rising profitability tend to grow shareholder value over the long term.
Tencent was a very profitable company. The internet and technology company reported $80.6 billion in total revenues in 2023, up 10% from 2022. Its profit attributable to equity holders after stripping out one-time or non-cash items was $22.3 billion, a 36% increase from 2022. Even after including those items, Tencent posted $16.3 billion of profit attributable to equity holders in 2023 (although that was down 39% from 2022's level).
The company's strong profitability and cash flow allowed it to return significantly more money to shareholders. Tencent proposed a 42% increase in its annual dividend for 2023. It also planned to double the size of its share repurchases to around 100 billion Hong Kong dollars in 2024 ($12.8 billion at the exchange rate in mid-2024). The company was able to significantly increase its cash returns while continuing to invest heavily in its business.
Tencent pays dividends to its investors. The Chinese company makes annual dividend payments to shareholders in Hong Kong dollars. In March 2024, the company proposed to increase its annual dividend based on its 2023 results by 42% to HKD3.40 per share ($0.43 per share).
In mid-2024, Tencent's dividend yield was less than 1% (given its share price and the exchange rates at the time), less than the S&P 500's roughly 1.4% dividend yield. Given Tencent's lower yield, annual payment schedule, and the risk of foreign exchange rate fluctuations, it's likely not a very appealing option for most dividend-focused investors.
Not everyone wants to be an active stock picker, especially when it comes to investing internationally. Thanks to exchange-traded funds (ETFs), you don't have to actively manage a portfolio of stocks. You can passively invest in an ETF that holds stocks based around a common theme or broad market index, such as Chinese stocks.
Investors seeking to use ETFs to gain some passive exposure to Tencent and other Chinese stocks could consider the following options:
Tencent didn't have an upcoming stock split as of mid-2024. The company has split its stock once since its public listing. It completed a 1-for-5 stock split in 2014. At the time, Tencent President Martin Lau commented on the reasoning behind the split, stating, "We hope to lower the investment threshold for investors."
While it has been a decade since its last split, Tencent shares still traded at a relatively low investment threshold for most investors, with its share price around $50 in mid-2024, so it doesn't seem like Tencent will split its stock again anytime soon.
Tencent is a leading Chinese technology company. It developed the popular WeChat app and several other leading digital platforms. They've enabled it to grow into an immensely profitable company.
However, investing in a Chinese company like Tencent is riskier than investing in a U.S.-listed stock. Investors need to carefully consider the added risks before adding Tencent to their portfolio.
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