During the global financial crisis of 2007-09, several British banks were on the brink of failure. For some, only multi-billion-pound taxpayer bailouts saved them. For example, Lloyds Banking Group (LSE: LLOY) shares were in free fall until the bank received a £20.3bn lifeline from HM Government.
By the way, this investment bought the people of Britain a 43% stake in the Black Horse bank. This shareholding was sold off over four years from 2013 to 2017, making £21.2bn. In other words, the UK made a profit of around £0.9bn on this trade.
Lloyds stock has been a long-term lemon
The bad news for the bank’s long-suffering shareholders is that its stock has been a big disappointment for many years. At its 52-week high, the share price hit 54.33p on 9 February 2023, but then tumbled as a US banking crisis rocked markets.
As I write, Lloyds shares stand at 41.62p, 5.6% above their 52-week low of 39.42p hit on 24 October. This values the UK’s largest mortgage lender at £26.5bn — a fraction of former highs.
What’s more, this Footsie stock is down 18.3% over one year and has dived 28.9% over five years. In other words, Lloyds has been a value trap for unwary investors for many years.
By the way, my wife and I fell into this trap, paying 43.5p a share for a stake bought in June 2022. Therefore, we are sitting on a paper loss of 4.2% to date (excluding dividends).
These figures exclude dividends
Then again, the above returns do exclude cash dividends, which have got increasingly juicy.
After recent price falls, the shares trade on a modest multiple of 7.5 times earnings, producing an earnings yield of 13.4%. This means that the bank’s dividend yield of almost 6.1% a year is covered a healthy 2.2 times by trailing earnings. To me, this suggests scope for further uplifts to payouts.
Sure, Lloyds shares haven’t been an ideal investment, but what about its dividend record? Here are the payouts per share for the past six financial years:
Financial year
Total dividend per share
2023
0.92p*
2022
2.40p
2021
2.00p
2020
0.57p
2019
1.12p
2018
2.14p**
Total
9.15p
* Interim dividend only. ** Final dividend only.
Investing £5,000 five years ago
To answer my title’s question, what if I’d bought Lloyds shares five years ago, when they stood at 58.57p? Investing £5,000, I’d be down around 28.9% — a capital loss of £1,447, leaving me with £3,553.
In addition, I would have received the dividends shown above on 8,536 shares owned. This boosts my return by over £781, delivering a total of £4,334.
Thus, there I have it: had I invested £5,000 in Lloyds shares five years ago, I’d have £4,334 today. That’s a loss of £666 (the number of the beast!), or 13.3%. Oops.
Finally, when I buy a stakes companies, I aim to buy their futures and not their pasts. Hence, I intend to hold on tight to our stake in Lloyds, not least for its future cash streams!
The post If I’d invested £5k in Lloyds shares 5 years ago, here’s what I’d have now 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.
