Lloyds Banking Group (LSE: LLOY) shares are among the most widely held and traded stocks in the London stock market. For many online brokers, Lloyds is usually the #1 buy and sell trade each week. Yet this company has been a graveyard for investors for many, many years.
An eternal value trap?
As I write (8 January), the Lloyds share price stands at 47.34p, valuing the Black Horse bank at £30.1bn. That’s almost exactly 7p — or 12.9% — below its 52-week high of 54.33p, hit on 9 February 2023.
Over one year, the shares are down 1.9% and they’ve lost 13.5% of their value over five years. However, these figures exclude cash dividends, which are very generous for Lloyds’ shareholders.
By the way, my wife and I bought into this FTSE 100 firm in June 2022 for 43.5p a share. Thus, we’ve made a modest paper gain of 8.8% to date. Frankly, that’s less than I’d hoped for after holding for one-and-a-half years.
Even worse, the bank’s stock has traded at these levels in July 2009 and repeatedly since. Thus, Lloyds has been a graveyard for value investors since the global financial crisis of 2007-09. When will this end?
Dividends have been decent
Returns for bank shareholders in recent years have been driven by rising dividends. For example, Lloyds’ dividend per share was 2p for the 2021 financial year and 2.4p for 2022. Furthermore, 2023’s interim dividend was 0.92p, 15% higher than 2022’s 0.8p.
I’m eagerly awaiting the final dividend, which should come in May. I expect a payout of at least 1.84p, up 15% on 2022’s 1.6p. This would take 2023’s total dividend to 2.88p — worth 6.1% of the current share price.
Looking ahead, analysts have pencilled in total dividends of 3.2p per share for 2024 and 3.6p for 2025. Based on a share price of 47.34p, these cash yields would be 6.8% and 7.6%, respectively. And I’ll hold on tightly to our Lloyds stock for these potential payouts.
What might change?
To be honest, I don’t expect the Lloyds share price to shoot out the lights this year. But if all goes well with the UK economy, credit growth and bad debts in 2024, it might exceed 2023’s high of 54.33p.
Currently, I see no obvious catalyst to light a fire under the share price. But maybe good news will emerge on 22 February, when the bank releases its full-year results for 2023? Ideally, I’d like to see revenues, interest income, earnings and return on tangible equity all beat forecasts.
Meanwhile, this popular stock looks cheap on fundamentals, trading on 8.5 times earnings and with an earnings yield of 11.8%. That’s more than enough to cover another dividend increase with the full-year results.
Then again, Lloyds is often seen as a bellwether for the wider economy. Hence, if the UK goes into recession in 2024, lending growth could reverse, while bad debts and loan losses could leap. This would most likely deal a blow to banks’ incomes, earnings and cashs flow.
Even so, I see Lloyds shares as a clear-cut bargain buy for me, so I’d like to buy more. However, I’ll hold off until the bank’s results drop on 22 February!
The post Lloyds shares are my bargain buy for 2024 appeared first on The Motley Fool UK.
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Cliff D’Arcy has an economic interest in Lloyds Banking Group shares. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
