The performance of Lloyds (LSE: LLOY) shares over the last five years has been largely uninspiring. Share price growth has been lacking. Since the outbreak of the pandemic, the stock has found itself above the 50p mark just a handful of times.
But are things changing? In 2024, the stock seems to have found its feet. As I write, it’s up 8.8% year to date. In the last six months, it has climbed 18.2%.
I’ve been an advocate of Lloyds shares for a while. They make up a good chunk of my portfolio. However, I’m contemplating buying more.
A share in the Black Horse Bank would set me back 52.3p. I’m fairly confident that there’s more to come.
Value to be had
There are a few reasons for this. To start, Lloyds looks undervalued. Right now, I can pick up shares trading around just seven times earnings. That’s compared to the FTSE 100 average of around 11.
That’s dirt cheap. I think there’s value to be had. Especially when you pair that with its 5.3% dividend yield. Of course, dividends are never guaranteed. However, covered around two times by earnings, the payout looks safe.
On top of that, share buybacks could provide the stock with a boost. In its full-year results, it announced a fresh £2bn buyback scheme, equivalent to around 6% of its market cap. In the years ahead, analysts are also expecting further buybacks totalling nearly £4bn. These are all positive signs.
Brighter times ahead
That said, I can see why investors have been steering clear of Lloyds. It’s heavily reliant on the UK economy. Racing inflation and high interest rates have taken their toll. As such, banks are deemed very risky at the moment.
There’s also the recent Financial Conduct Authority scandal to consider. Lloyds set aside £450m last year to cover this. However, some believe the final charge could be nearly triple that.
But in the years to come, all things considered, I think the Lloyds share price can keep rising. As interest rates fall, sentiment around the economy and banks will pick up.
Falling rates will harm profits. But it’s unlikely rates will drop as low as the levels we’ve become used to over the last decade for some while. This means the business will be able to continue expanding its bottom line in the years to come.
Falling rates should also provide the property market with some much-needed stability. As the UK’s largest mortgage lender, this will also provide Lloyds with a lift.
Time to kick on?
Can Lloyds kick on from here? It’s finally been gaining the momentum that investors have been seeking for years. I’m confident this could be just the start.
Let’s get it right — we’re not out of the woods yet. This year has the potential to continue being choppy. However, looking beyond that, I think the stock could be a top performer.
I’ve been holding onto my shares for a while. Today, I’m up 7.2%. I intend to keep holding them. If I have any spare cash, I’ll be looking to buy more.
The post Here’s why I think Lloyds shares are about to turn a corner appeared first on The Motley Fool UK.
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More reading
At 50p, are Lloyds shares still undervalued?
3 things that could push the Lloyds share price to 60p and beyond
Is Lloyds’ soaring share price still 11% undervalued?
Are Lloyds shares about to surge by 50%?
I’m up 18% on Lloyds shares! Is it time to sell?
Charlie Keough has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.
